Credit Information Bureau (India) Limited (CIBIL) is a credit information company that preserves and maintains all the data relating to credit-record of companies as well as individuals. On the basis of the preserved credit history, it provides a “CIBIL Score”. CIBIL score is basically a three-digit number that demonstrates the credit health of a person. It is a condensed, numerical sketch of a borrower’s credit and repayment behaviour. It can fall anywhere between 300 to 900. A CIBIL score of 750 or more is considered ideal by most lending institutions. CIBIL score has four main constituents: –
• Payment History – 30%
• Credit Exposure – 25%
• Credit Type and Duration – 25%
• Other Factors – 20%
What is the importance of CIBIL score?
Most importantly, a higher CIBIL score increases the plausibility of acquiring new credit (loans, credit cards, etc.) with favourable terms (like lower interest rates, better rewards, discount on loan processing fees, etc). And it also helps the borrower to keep track of his credit report so that he can rectify any defaults as soon as possible.