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credit Score

What do you need to know about your credit score?


CIBIL (Credit Information Bureau India Limited) or credit score reflects your creditworthiness. It has a basis on your borrowing and repayment history, as shared by lenders. Cibil score ranges between 300 and 900. A score above 700 is generally considered good. Different lenders have different requirements concerning CIBIL scores. It is like the first impression of the borrower for the lending institution.

A person who manages his finances well will always have a higher CIBIL. Whereas, the borrower who has a low CIBIL score will have lower creditworthiness towards the repayment of loans. There are several factors that are taken into consideration while calculating the credit score. It is like the relationship of the applicant with the bank, repayment history, outstanding debt, etc.

‌Everything you need to know about CIBIL score.

Factors affecting credit score

Here, we will discuss a few of them:

1. Repayment History of the borrower:

Applicants’ repayment history influences most in credit score. It is a crucial aspect that is taken into consideration while undertaking calculations. The past performance of repayment of funds, whether the applicant has paid the loan in time or not is checked. The bank as well as the Credit bureau keeps a track of month-to-month records of the EMIs of the applicant and studies their relationship with the banker. The timely repayments will give a positive score, but the inconsistency in payments will negatively impact the score. The repayment history contributes approximately 30-35% weightage to the overall score.

2. Credit Balance of applicant:

The other factor is the credit balance in the account of the applicant while making repayment of loans. The score will get affected when the applicant does not have a favorable credit balance while making the payment through EMIs. Hence, one should maintain a credit balance in their account.

3. Outstanding Debt:

Having an outstanding debt hampers largely on CIBIL. One must not have any outstanding debt while applying for the new loan, this affects your CIBIL intensely and negatively. The borrower loses the credit from the bank as well as from the credit bureau, and it becomes difficult to gain confidence again.

4. Duration in Credit Line:

This impacts the medium on the score. Generally, banks, NBFCs, or Financial Institutions give priority to their old or regular customers. i.e. Their genuine customers and tends to help them throughout. This shows that you have used the given credit responsibly and have repaid dues on time.

5. Irresponsible Payment Behaviour:

Many times banks remind their customers about the outstanding dues and still, they behave ignorantly in paying them on time. This will affect the score negatively and face huge problems while sanctioning future loans.

6. Type of credit used:

Any bank, NBFC, or Financial Institution can give any one of the secured or unsecured loans. This type of credit too matters a lot in calculating credit scores and impacts up to 20% on the score.

Where is the requirement?

A credit score is required in the process of the loan. The more the amount of loan, the more the requirement of CIBIL. The minimum CIBIL for corporate financing is usually between 700 and 750. Having this score means you are creditworthy and lenders will approve your loan application quickly. Below is the list of the places where CIBIL matters:

  1. In loan approval, mostly unsecured loans require a high score due to the absence of security.
  2. While applying for credit cards, the score is checked for understanding whether or not the applicant has the capacity for repayment in a specified time.
  3. When a company wants to raise finance to a higher amount, the credit score is given the top priority.


The advantages of having a good credit score are as follows:

  1. The applicant can get easy loans from a lending institution. The lender will have confidence in the borrower that he will pay back the loan in a specified period of time.
  2. The ROI is low for an applicant with a creditworthy score and vice versa. The ROI is directly proportional to the risk involved, hence ROI will increase with increasing risk.
  3. The higher the score, the faster the approval. Whereas, a low credit score makes it difficult to get loans. Also, a higher credit score approves a larger number of loans.

How can you grow a credit score?

Following are the ways of growing credit score

  1. Always try to pay dues on time i.e may that be credit card dues or any other. Late payment negatively affects scores and becomes tedious to develop again.
  2. Maintain appropriate credit balance in a bank account. Having a low or negative balance affects the score adversely.
  3. Periodically, the business should keep a track of a credit report and examine what is to be done to keep a positive score throughout.

To conclude

A credit score is similar to a report card. It grades your financial fitness based on how you have used credit in the past. Just like a report card, your credit score can be used to give lenders an idea of whether or not you are a good candidate for an unsecured loan. A good credit score is something that every borrower dreams of. It helps you get a good loan amount from a bank at a lower interest rate. Thus, the higher the score, the faster the approval. Whereas, a low credit score makes it difficult to get loans.

Know in detail about TransUnion CIBIL here.

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