What is CIBIL Score & How To Calculate: The difference between a credit score and credit report, a CIBIL Score used by bank representatives when seeking credits from the bank? Don’t worry.
We will discuss the differences among these terms in detail today.
What is CIBIL Score & How To Calculate?
One of India’s largest credit bureaus is licensed by the RBI. Credit scores calculated by CIBIL are called CIBIL scores.
In addition to Equifax, Experian, and Highmark, credit scores formed by other India’s major credit bureaus are deemed equally valid.
However, most lenders prefer CIBIL credit scores.
CIBIL Score Full Form?
CIBIL os long-form is Credit Information Bureau India Limited
What makes CIBIL Scores so important?
Providing reliable information about loan applicants is a source of income for four companies licensed by the FBI.
As the most well-known and first company among them, CIBIL was founded in 2000.
CIBIL stands for Credit Information Bureau India Limited.
The statement indicates a credit rating agency is responsible for assigning credit scores and creating credit reports.
CIBIL score is a three-digit number given to an individual to summarise his credit rating and history.
How do you calculate your credit score?
CIBIL scores are calculated by TransUnion CIBIL using a variety of sources.
- Individual’s financial data for a minimum of six months
- Amount of outstanding credit (credit exposure) – 25% score weightage
- A score of 30% is based on credit history (service of past debt agreements)
- Length of loan and mix of credit portfolio (proportion of credit portfolios) – 25% of the score
(Credit utilization and current credit behaviour) – 20% score weighting
How does a credit score work?
Credit scores are three-digit summaries of your overall credit history.
Using an algorithm, an Indian credit bureau produces a 3-digit score based upon your credit history.
A credit score typically falls in the 300 to 900 range.
Having maintained good credit, your credit score will be high.
Borrowers with credit scores above 700 are typically approved for a loan by most lenders in India.
Importance of Credit Score in India
If you have taken loans or used credit cards in the past, you should regularly check your CIBIL score from the official CIBIL website.
Always check with the lender to verify your credit score. Read More: How to Transfer Money Through RTGS
You must improve your CIBIL score and apply for a new loan immediately if your CIBIL score is low.