The financial institution looks at various parameters before providing loan application approval. One of the crucial parameters is your credit score or CIBIL score. However, how does a lender get to know about your credit score? Why is the free CIBIL score check important for loan approval? And how to check CIBIL score by PAN card? All these questions are answered here. Read on to clear your doubts linked to your credit score.
What’s the full form of the CIBIL score?
The full form of CIBIL is Credit Information Bureau India Limited. This is the score generated by TransUnion CIBIL, which is a credit information company that works under RBI (Reserve Bank of India) and computes your individual credit rating. It reviews your credibility and assigns them in a numerical manner or score ranging anywhere between 300 and 900. This credit score allows financial institutions and banks to analyse your credibility as a borrower before approving your application for a loan.
What’s a credit score?
Credit information bureau evaluates your credibility. For this, the CIBIL analyse your individual credit past record, debt and other linked information and based on this analysis creates a credit report. CIBIL assigned the credit score to the applicant of the loan depending on their credit profile, which usually ranges between 300 and 900. A score range of 750 and above is looked upon as excellent while a credit score below this range is looked upon as poor. Your credit score can be low because of various parameters like missed EMI repayments, loan defaults, wrong CIBIL report, a high credit utilisation ratio of more than 30 per cent and missed credit card due payments.
Additional Reading: CIBIL Score Check Free Online by Pan Number
How is credit score computed?
Credit information bureau computes the CIBIL score of the borrower using the parameters mentioned below –
The credit utilisation ratio is the percentage of used-up or exhausted credit balance against your overall credit limit. Most experts recommend that you maintain a CUR (credit utilisation ratio) of 30 per cent of your credit card limit or below. Any excessive usage of credit shows that you as a borrower are dependent on the credit card for meagre reasons. This lowers your credit score and even can negatively affect your credit report.
Past repayment record
Your credit history or past credit record even shows your punctuality in timely loan repayments. Constant delays in loan repayments can negatively impact your credit score. Additionally, a low repayment past record shows financial indiscipline in loan management. Thus, financial institutions and banks may consider such individuals as highly risky.
Mix of credit
CIBIL rating agencies even consider the kinds of loans a borrower generally opts for. For instance, an individual’s rating may fall if he places an application for just a personal loan and other credit options, which are unsecured in nature. In contrast, a balanced mix of unsecured and secured loan options would increase your credit score in the credit report, making you eligible for more credit in the future.
Multiple hard inquiries
At the time when you place an application for a loan, then credit rating agencies conduct hard enquiries on your report to get an idea about your credibility. A lot of hard inquiries can lower your credit score as lenders consider you to be having a high credit risk. This is very distinct from the soft inquiries on credit, which include a basic background check.
What’s the importance of fetching a CIBIL report?
Today, you can fetch your CIBIL score easily if you have a PAN card. For this, you just need to visit the online lending marketplace and input your personal details along with your PAN details. Once submitted, your credit report containing your credit score would be displayed instantly in no time. With this report, you can know about your credit standing. In the case your credit score in your CIBIL report is poor, then you must ensure to take up disciplined steps to ameliorate your score and be eligible for a loan in the future. Pointers mentioned below emphasise the importance of performing CIBIL score checks –
- It helps lenders in deciding your credibility.
- Lending decisions are taken on info mentioned in your CIBIL credit report.
- Reviewing your CIBIL report periodically may assist you adopt financial discipline.
- CIBIL score of 750 and above endows you with negotiating power when it is to setting your loan’s interest rate and processing charges.
CIBIL score range –
The CIBIL score range is mentioned below in a tabular format –
|CIBIL score||Credibility||Approval chances|
|Between 750 and 900||Excellent||Very high|
|Between 700 and 749||Good||High|
|Between 650 and 699||Fair or satisfactory||Possible|
|Between 600 and 649||Doubtful||Tough|
|Less than 600||Immediate action required||Low|
How can you get the CIBIL score as per your preference?
Mentioned here is a stepwise process to avail the score as per your preference.
No. 1 step – Approach the official site of the CIBIL TransUnion.
No. 2 step – Hit on the option “know your CIBIL score”.
No. 3 step – Input your personal details like your name, mail ID, registered phone number, birth date and PIN. Also, ensure to attach the identity documents like your Aadhaar card, PAN card, Voter ID, or passport.
No. 4 step – Hit on the continue or accept option.
No. 5 step – Input the OTP you get on your phone number and then click to continue.
No. 6 step – Once you are enrolled successfully, hit on the option “go to dashboard” and check your score.
No. 7 step – You may be redirected automatically to CIBIL’s site. Here, you may view your score post-signing in.
Frequently asked questions (FAQs) –
Your credit score equals 680. What should you do to ameliorate your credit score?
Ensure to repay your dues and EMIs timely and in full. That is probably an essential way to ameliorate your credit score. Also, you can review your CIBIL score timely. If there are any kind of inaccuracies, then you may consider writing to the concerned lender or credit bureau for rectification.
What happens if your score is low or poor?
Getting credit access is tough if your score is poor or average. Lenders may either turn down your loan or other credit application or approve your application at a higher interest rate to make up for the higher credit risk involved.