What is CIBIL Score?
CIBIL Score - A 3-digit numeric figure with a good CIBIL score range of 300-900 is also a good indicator of your credit repay-ability or loan. You will get better and more chances of getting a loan as your CIBIL score will be higher.
Lender's firstly and mostly look at your CIBIL score when they receive your credit card application or loan application. Because your CIBIL score tells them whether you will pay off the loan amount or not, the lender may also check your credit repayment behaviour, borrowing pattern, etc.
CIBIL Score Calculation:
It is a number between 300- 900 and on which financial institutions depend to determine your creditworthiness for any advance, loan, credit application, etc.
TransUnion CIBIL Limited is an authorized body undertaking the CIBIL score calculation work. Credit information reports get generated with this authorized body. This report contains all the information about the applicant's credit payment history with loans, credit cards, etc.
How to Calculate CIBIL Score for Credit Card?
1. Credit History:
In your CIBIL report, the highest priority is given to your past or previous repayment history on loans and credit cards. All the information sent by banks and other financial institutions like EMI compliance, bill payments, and further details of credit is collated by the credit bureaus.
Suppose any past or previous dues occur, like a missed or delayed EMI payment or credit card payment, etc., then the credit report will also represent the same. Your credit score will be highly impacted by this type of negative activity in your CIBIL score.
2. Credit Utilization:
The credit amount used against your total credit limit is known as credit utilization. It is a strict recommendation to maintain your credit utilization at approx. 30%. If your credit utilization is in a downward usage trend, then it will help to boost your credit rating.
So, you must make sure you pay well over the minimum payment due and limit your spending if you have credit cards. To the extent your credit as possible; just remember to always do your best to pay off your credit card bills. Do you know why? Because even if you use to pay your minimum amount due, the interest will be charged to you for your remaining amount and this will rack up your overall utilization and then finally affect your CIBIL score. You must always try for a cash transaction or use your debit card more.
3. Credit Mix and Duration:
The type of credit on which you depend the most is checked by the bureaus during your CIBIL score calculation. The credit you rely on will highlight whether you are a risky borrower or secured. If you have taken credit like personal loans, credit cards, etc., which is also known as unsecured credit, then it highlights you are a risky borrower. If you have taken credit like home loans, car loans, etc., which is a secured loan, it highlights an intelligent and wise borrower and helps to enhance your rating but only if you have timely repayments.
Time taken is another parameter that is taken into consideration to service your credit. Your credit rating can be boosted with the loans that you have repaid on a more extended schedule.
4. The number of Hard Inquiries:
Another thing on which your CIBIL score or credit score calculation depends is the number of times you have made a credit application. In order to understand your credit behaviour, lending institutions check your CIBIL report on your every attempt to secure credit.
Your CIBIL rating will be impacted by this number of hard inquiries. So the best thing is to apply for credit to an institution you are sure of getting approval for.
How to improve your CIBIL score or how to get a good CIBIL score?
- Firstly, you must use your credit responsibly to get a good CIBIL Score. Also, avoid borrowing credit that you may feel unable to pay back.
- You must avoid making late or missed payments. For that, you can create any reminder or alert system that helps you remember that you have to pay your payments.
- You must maintain a low credit utilization ratio, especially when applying for home loans.
- You must close those accounts, which can bring down your CIBIL score.
- You must review your credit report regularly.
Follow all these essential points of your credit to make your CIBIL Score better and to be a good applicant for applying to any type of loans you require.