Knowing what CIBIL score is not only important for individuals with a credit history but also for those who want to apply for home or personal loans, credit cards etc. A CIBIL score is a 3-digit number between 300 to 900, that is calculated based on an individual’s past credit history and ongoing credit activities. The closer your score is to 900, higher your chances of getting credit from banks and other financial institutions. Understanding how CIBIL or credit score works will help maintain the score as well as work towards improving it.
There is a lot to understand about CIBIL score in order to maintain it, work towards improving it and ensuring that your score is excellent at all times. Take a look at these 11 interesting facts which are essential for a good credit score or CIBIL score but very few people are aware of.
It’s a myth that checking your CIBIL score more frequently will eventually affect it negatively. In reality, an individual can request for their CIBIL score and enquire about it as many times as they wish. When someone enquiries about their credit or CIBIL score from an authorised third party or directly from the credit bureau, this enquiry is recorded as a soft enquiry. Soft enquiries can be made as often as the person wants and it will never impact or affect their credit score.
However, your credit score can be affected when credit card companies or banks enquire about your credit report, as these are counted as hard enquiries.
A lot of people presume that if they have no credit history i.e., don’t own credit cards, haven’t taken any loans or even make online payments etc, then their score will be excellent. However, if an individual has no credit history whatsoever then they can never request for a credit report or enquire about credit score from CIBIL. Moreover, this request cannot be made to any other credit bureaus either as they never received any data from lenders that would help them generate a report and calculate your score.
There are many interesting facts about credit scores, and one of them is that the terms CIBIL score and CIBIL rank are not interchangeable. Both these terms are provided by the TransUnion CIBIL. While the term CIBIL score is applicable to individuals, the term CIBIL rank, or Credit Rating is applicable to companies. CIBIL score ranges from 300 to 900 and the closer your score is to 900, higher are your chances of getting loans and credit card approvals at competitive interest rates. CIBIL rank ranges from 1 to 10, with 1 being excellent. Hence, closer the company’s rank to 1, higher are their chances to get loan sanctions from institutional lenders.
Even if the credit information of an individual is identical, the credit score generated by TransUnion CIBIL and that by various credit bureaus like CRIF High Mark, Experian, Equifax, may or may not be the same. The reason for this is that every credit bureau has their own scoring model.
Additionally, your credit score could also be different from your CIBIL score as the updated credit information from different lenders is not usually reported on the same day.
CIBIL score is based on your past credit history and ongoing activities. Even the credit report has a summary of your past and ongoing credit accounts. It has no information based on your fixed deposit accounts, demat or trading account, savings account, etc.
Your credit report is generated from the credit information and activities that they receive from credit sources like banks and other lending institutions. CIBIL, however, doesn’t have the authority to directly edit or delete any information in the report directly. It is crucial to know credit report facts like these so that you know who to contact or reach out to if you want errors in your credit report to be rectified.
A lot of people think that since they never requested for a credit report then they would have no CIBIL score. However, every month even lenders such as banks report borrowers’ credit information of all borrowers to the credit bureau. That is why, even if you have never requested for a CIBIL report, your credit information report and CIBIL score still exists.
Applying for multiple loans could gravely affect your credit score. If you have applied for multiple loans at the same time or even separately, lenders may not give a very financially stable picture of you. More the credit cards, home loan, personal loan, etc, higher the chances of you being dependent on credit for your expenses and that will only decrease your creditworthiness.
There are many account holders who think that old credit accounts could impact their score negatively and hence they often close such accounts thinking it will help improve their score. However, this could work in the borrowers favour too. An old account will be testimony to how well the borrower has been responsibly handling credit for so long and that could help him get competitive interest rates and better offers in the future too.
Often one of the most common misconceptions is that people believe credit bureaus and CIBIL maintain a defaulter list. However, in reality, CIBIL and other credit bureaus are only responsible to collect and maintain credit information of those individuals that are requested by NBFCs and banks. It solely depends on the banks and NBFCs whether they want to sanction the loan.
It is a misconception that every applicant with a low CIBIL score won’t get a loan. Low CIBIL score could mean rejections from some banks or lenders, however, it would be wise to apply for every bank or lending institution. It is possible that however low the credit score is, it still might fit into the criteria for some bank or NBFC.
There is a lot about CIBIL score that most people don’t understand, however, it is crucial to know and comprehend these interesting facts. Increasing your knowledge of CIBIL and knowing credit score important facts will not only help you improve your score but also maintain it routinely.