India has four credit bureaus – CIBIL, Experian, Equifax, and CRIF High Mark. They collect your financial data from credit providers to prepare your credit report. When you apply for credit, the finance provider checks this score to determine your eligibility.
When applying for a new credit product, you must be wondering what is a good CIBIL score to qualify. Here is an overview.
What is a CIBIL Score?
CIBIL score is a 3-digit number ranging from 300 to 900. The credit bureau determines your score according to your past credit behaviour. Lending institutions use this figure to evaluate your creditworthiness.
Understanding the CIBIL Score Ranges
Here is a look at the CIBIL score ranges:
| Range | Meaning | Implication |
| NA/NH | Not Applicable or No History | Indicates no history of using a loan or credit card. |
| 300-599 | Poor | Indicates an inconsistent repayment history and unpaid credit dues. |
| 550-649 | Fair | Indicates that you may qualify for credit but at a higher interest rate. |
| 650-749 | Good | Indicates good credit behaviour, attracting quick loan approvals. |
How Does CIBIL Generate Credit Reports?
CIBIL considers various factors to generate credit reports. These include the following:
- Repayment History: If you have a poor credit history, loan providers will consider you risky. CIBIL receives information about every loan or credit product you take. Timely repayment builds an excellent CIBIL report and improves your loan eligibility.
- Credit Utilisation Ratio: Loan companies avoid borrowers with a high credit utilisation ratio or CUR. It determines your repayment capacity based on your credit limit usage. If you use most of the available credit regularly, lenders consider you credit-hungry and refrain from lending.
- Multiple Credit Lines: The more credit products you have, the higher your debt-to-income ratio. A high DTI ratio signifies difficulty repaying your EMIs on time.
- Loan Enquiries: Repeated loan enquiries indicate your hunger for credit, negatively impacting your credit rating.
- Credit Diversity: The credit score decreases if you borrow multiple collateral-free loans. Diversify your credit portfolio with different types of credit products to improve your score.
How Does CIBIL Score Impact Your Borrowing Process?
CIBIL score is vital during the borrowing process. It reflects your creditworthiness as per your past financial behaviour. Here’s how it impacts your loan application:
- Credit Approval: A high CIBIL score significantly increases your chances of credit approval. Since it projects you as a creditworthy borrower, loan companies feel more comfortable approving your application.
- Interest Rates: Your CIBIL score directly impacts your interest rate. A decent score attracts a lower interest rate, reducing your loan cost in the long run.
- Loan Terms: A strong credit rating leads to favourable loan terms. These include longer repayment terms with smaller EMIs.
- Loan Amount: A high credit score makes you eligible for a bigger loan amount.
A good CIBIL score streamlines the loan borrowing experience by unlocking better options. A low interest rate saves money in the long run. So, achieve a good CIBIL score and simplify your loan process focused on your goals.
Disclaimer: The information provided in this blog post is intended for informational purposes only. The content is based on research and opinions available at the time of writing. While we strive to ensure accuracy, we do not claim to be exhaustive or definitive. Readers are advised to independently verify any details mentioned here, such as specifications, features, and availability, before making any decisions. Hero FinCorp does not take responsibility for any discrepancies, inaccuracies, or changes that may occur after the publication of this blog. The choice to rely on the information presented herein is at the reader's discretion, and we recommend consulting official sources and experts for the most up-to-date and accurate information about the featured products.
