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What is CIBIL?

CIBIL is India’s first credit information company and it is also called Credit Bureau. The company collects information of individuals regarding loans and credit cards. The data collected are tabulated and based on this a credit information report is generated. This report acts as a base for developing a credit score. This credit score is used by lenders to give loans to loan seekers. This is an authorized bureau licensed by Reserve Bank of India.

Importance of CIBIL

When a loan seeker submits his loan application form, the first check by the lender is the CIBIL score. Though not the only criteria for acceptance or rejection of a loan application, but, the CIBIL score is a very important factor in getting your loan application through for a consideration.

Factors affecting CIBIL score

CIBIL is a score based on credit taken and repayments done by the individual. The below-mentioned factors can affect your CIBIL score:

  1. Payment history
  2. High utilization of credit limit
  3. Higher percentage of credit cards or personal loans
  4. New accounts opened recently

  5. “low risk”.

    Prior to approving disbursement of the loan amount and putting forth the interest rate, banks and credit card companies will use a variety of different information to give you a credit score.

    Credit scoring can be based on information such as:

    1. Information provided in the application
    2. Data with the lender about the applicant.
    3. The timings of previous payments as compared to the schedules.

    A better credit score is got if:

    1. The applicant has got his own house
    2. The applicant has been living in the same locality for a longer period of time.
    3. Has good credit history like repaying loans on time.
    4. Has been working with same organization for a longer period of time

     What happens if you get a poor credit score?

    1. A poor credit score indicates a high rate of interest.
    1. It also means less credit amount.
    1. It can also affect the existing loan as the lenders keep a look at the credit ratings of individuals.

    How to improve credit rating?

    1. Cancel unused credit cards.
    2. Enroll in the voter’s list, get PAN card and Aadhar card.
    3. First, ensure all credit related issues are sorted before applying for fresh credits.
    4. Ensure the balance payments are paid on time.

    In conclusion, it is advised that the loan seeker ensures adherence to repayment policy and never try to make payments without sufficient balances in the bank account.

Vikas Agarwal
the authorVikas Agarwal
Vikas Agarwal is an IIT-Varanasi graduate in Chemical Engineering. He is the Founder and CEO of - an investment advisory website. He is a Business Development Professional but a Value Investor at heart. He writes articles on Finaacle, which focus on simplifying the art of investing and the causes of human misjudgment when it comes to investing. He also shares his experiences as an investor and lessons from some of the greatest investors of all time.

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