Good CIBIL Score

A credit score plays a crucial role in determining a lender’s trust when approving a loan application. Among the RBI-approved credit rating agencies, CIBIL (a part of TransUnion) is a key player in assessing both individual and business creditworthiness. It generates CIBIL scores based on financial data from banks and lending institutions.

A high CIBIL score ensures seamless access to loans and credit cards, while a low score can limit borrowing opportunities during financial emergencies. But what exactly qualifies as a good CIBIL score? Here’s everything you need to know!

The Credit Information Company (CIC) has revised its scoring criteria for borrowers and cardholders, leading to noticeable shifts in CIBIL scores. For instance, a previous score of 724 now equates to 701.

This change stems from CIBIL’s updated algorithm, which now evaluates 36 months of credit history instead of 24 months. Additionally, individuals with less than six months of credit history can now receive a score, a feature absent in the previous model.

The update aims to provide a more comprehensive assessment of borrowers’ credit behavior over time. However, a drop in CIBIL score due to this update will not impact loan eligibility, as banks and lenders are adjusting their policies accordingly.

What is a Good CIBIL Score?

What is a Good CIBIL Score for Loans?

A good CIBIL score for loans remains between 700 and 900, significantly increasing your chances of loan approval. Whether you're applying for a personal loan, car loan, or home loan, a CIBIL score above 700 is favorable, ensuring lower interest rates, higher loan amounts, and longer repayment tenures.

Additionally, a strong CIBIL score streamlines the documentation process, making loan approvals quicker. For home loans, borrowers with a score between 700 and 900 can secure up to 80% of the property's value.

However, for personal loans, which are unsecured, the loan amount depends on both your CIBIL score and loan purpose. In the case of car loans, while there’s no fixed requirement, maintaining a score above 700 boosts approval confidence.

Factors Affecting your CIBIL Score

Though you are unaware of the effects of your actions, you may still be contributing to your credit score getting reduced. Here is a list of few actions that directly contribute to lowering your credit score:

Late Payment

High Utilisation of Credit Limit

Lenders determine your credit limit based on your income and debt-service ratio, indicating how much you can afford to repay after meeting other financial commitments.

Regularly using over 50% of your credit limit can put your CIBIL score at risk, signaling poor financial management. To maintain a good credit score, it’s essential to keep your credit utilization below 50%, ensuring a stable and responsible credit profile.

Multiple Credit Applications

Applying for multiple loans within a short period can make you appear desperate for credit, negatively impacting your CIBIL score. Each lender's inquiry request gets recorded in your credit report, signaling credit hunger and raising concerns about your ability to repay the loan.

With the latest scoring algorithm, factors like long-term outstanding balances, repayment-to-balance ratio, credit card transaction history, and the number of accounts opened or closed now influence your CIBIL score.

Before applying for a loan, check your credit report to assess your eligibility. If your CIBIL score is low, take steps to improve it before approaching lenders. Avoid multiple loan applications to maintain a strong credit profile.

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