What is a Good CIBIL Score and Tips to Maintain It

What is a Good CIBIL Score?

A CIBIL credit score is a 3-digit representation of an individual’s credit history and creditworthiness. It typically ranges from 300 to 900, and reflects the types of credit lines an individual has obtained, as well as their repayment status.

What is a Good CIBIL Score for Loans?

Different loan types have different minimum expected CIBIL scores. For instance, a home loan is considered to be a secured loan, so a borrower can qualify for one even with a relatively low CIBIL score. Here are the CIBIL scores typically required for the most common types of loans. 

However, it should be noted that these requirements are not absolute: different lenders may have different criteria and requirements for loan approvals.

What are the Benefits of a Good Credit Score?

1. Better access to credit cards and loans

A good credit score reflects your ability to manage your debt and credit. This can boost lenders' confidence, giving you better access to loans and credit cards. 

2. Lower interest rates 

Having a good credit score can help you access lower interest rates on loans. 

The interest rate is typically tied to your credit score. A good credit score can help you obtain the best interest rates, thereby lowering your overall credit charges. 

3. Quick approvals

A high CIBIL score indicates that you are a financially stable and responsible borrower, which means you have an excellent chance of getting quick approvals for a loan (T&C may apply). 

Typically, lenders look to provide loans to individuals who have stable credit scores. In some cases, a good CIBIL score might also speed up your paperwork and formalities. 

4. Save on insurance

A good credit score can help you get better insurance deals. Insurance companies use various methods to determine whether someone is eligible for certain policies based on their level of risk. If they know that someone has paid off all of their dues, they might offer them a lower premium than they otherwise would have. 

5. Approval for high credit limits

Generally, your repayment capacity directly affects your credit score and creditworthiness. If you as a borrower have an excellent credit history, lenders may be willing to let you borrow more. In other words, a good credit score can help you access higher credit limits. 

How Can You Maintain a Good Credit Score?

A decent credit score can easily be maintained by following a few simple rules and perhaps mending a few financial habits. Here are some of the main things you can do to maintain a good credit score. 

1. Paying your bills on time

• To maintain a good CIBIL score, you should aim to pay your bills on time and in full. Doing so boosts lenders' confidence and indicates to them that you are a responsible borrower.

2. Not drawing multiple loans

• Drawing multiple loans can be a red flag for lenders. Doing so might indicate that you are an individual who is incapable of managing credit or is neck-deep in financial troubles. 
• If you draw multiple loans, the risk to your lenders rises considerably. And in the worst-case scenario, if you fail to repay your loans, your credit score will take a severe dent. So, unless absolutely necessary, avoid drawing multiple loans. 

3. Avoiding late payments

• It is important to avoid late payments to maintain a stable credit score. 
• Late payments can decrease a lender's confidence in your ability to repay. Also, late payments may attract a considerable amount in penalties (such as credit card late payment fees).

4. Staying below your credit limit

• Your credit limit is determined by several factors, such as the type of loan, your income and debt levels, and more. 
• Overshooting your credit line or mismanaging your debt can invite serious consequences and tank your credit score. It is best to stay below your credit limit to always have a margin of safety. 

5. Checking errors in credit reports and bills

• Any errors in your credit reports and bills can negatively impact your credit score. Hence, it is paramount that you comb through your credit reports to verify the figures in them and catch any potential errors.