Blog #2: Does CIBIL Score Really Matter? A Hidden fact about Loan.

                                            

What is a CIBIL Score?

A CIBIL score is a three-digit number ranging from 300 to 900 that represents an individual's creditworthiness. It is generated by TransUnion CIBIL, one of India's major credit bureaus, based on an individual’s credit history, repayment behavior, and financial habits. A higher CIBIL score increases the likelihood of obtaining loans and credit cards at good terms.

Credit Score Range:

Category	Score Range
Excellent	801-900
Very Good	761-800
Good	701-760
Average	601-700
Needs Help	300-600

Source: Paisabazaar

Why is CIBIL Score Important?

1. Loan and Credit Card Approval – Banks and financial institutions use the CIBIL score to assess risk before approving a loan or credit card application.
2. Lower Interest Rates – A high CIBIL score often leads to better interest rates on loans, saving significant money over time.
3. Higher Credit Limits – A good credit score helps secure higher credit limits on credit cards and loans.
4. Faster Loan Approvals – Financial institutions process loans quicker for individuals with high CIBIL scores due to lower risk perception.
5. Better Negotiation Power – Borrowers with high credit scores have better bargaining power to negotiate favorable terms with banks/lenders.

How to Improve Your CIBIL Score?

If your CIBIL score is low, you can take the following steps to improve it:

1. Pay Bills on Time.
2. Avoid Multiple Loan Applications.
3. Check Your Credit Report Regularly.
4. Have a Healthy Mix of Credit Cards and Loans.
5. Avoid Defaulting on Loans.
6. Close Unused Credit Accounts Carefully.
7. Discuss with Lenders if struggling with repayments, negotiating for better terms or restructuring loans can prevent a major negative impact on your credit score.

How Long Does It Take to Improve the CIBIL Score?

Improving a CIBIL score is a gradual process that may take 6-12 months, depending on the severity of issues affecting it. By maintaining disciplined financial habits, one can steadily enhance their creditworthiness over time.

Conclusion:

A good CIBIL score is crucial for financial stability and access to loans on good terms. By following responsible credit behavior, making timely repayments, and keeping financial commitments in check, individuals can improve and maintain a high credit score. Regular monitoring and proactive measures help ensure a healthy financial profile, allowing easy access to credit when needed.