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The credit score is essential for any individual or business looking for credit. It is a crucial 3-digit number that demonstrates a borrower’s repayment capacity, based on which lending institutions determine an applicant’s eligibility. TransUnion CIBIL is a trusted credit bureau that calculates CIBIL scores for individuals and companies.
An excellent score leads to quick loan approvals, lower interest rates, and favourable terms and conditions from top lending institutions like Hero FinCorp. However, what does a credit score 0 means? Read on to learn more about the concept.
A zero CIBIL score means the individual's credit history is below six months old. That is because the credit bureau does not have sufficient information to evaluate their credit history and assign them a CIBIL score. Building a credit history takes time. Hence, those new to credit often see a zero credit score in their CIBIL report.
The CIBIL credit bureau evaluates multiple factors to calculate credit scores. Aligning with the CIBIL meaning, they assign a particular weightage to different credit behaviour aspects, including the following:
Repayment History (30%): The consistency and regularity of repaying loan EMIs and credit card bills
Credit Exposure (25%): Age and amount of credit and their outstanding balances
Credit Type and Duration (25%): The age of credit history and the types of credit products in the portfolio
Other factors (20%): Includes active credit card, existing loans, and credit-related inquiries in the recent past
Also Read: What is TransUnion CIBIL Score and How to Check Online?
These are the potential causes of a credit score hitting zero:
Also Read: Top 10 Reasons Why Your Credit Score Has Gone Down
Since lending institutions give due importance to an applicant’s credit score, one must check their credit score before applying for a loan. While 0 CIBIL means no credit history, here are some credit score improvement strategies that work:
Also Read: How to Get a Perfect 900 Credit Score?
Although a zero CIBIL score means nothing negative about an individual’s credit profile, they may find it challenging to borrow loans with it. Those who perform a credit score check and find a zero credit score need not worry. They must wait patiently and follow the above steps to improve their credit and build a profile. Once the score reaches a decent figure, they can borrow credit with the best terms and conditions.
Also Read: What Is CIBIL Score - Credit Score Limit: Meaning and Impact
1. Is it good to have a zero credit score?
Although a zero CIBIL score means nothing negative in the credit report, it makes access to credit challenging. Therefore, rather than not taking any credit at all, one can take small loans according to their requirements and repay them on time to build a credit profile.
2. How do you fix a 0 credit score?
Taking credit and repaying it on time is the best way to fix a 0 credit score. Many lending institutions also provide credit to no-score individuals, though at a higher interest rate.
3. Is zero credit better than bad credit?
Yes, zero credit is better than bad credit. While a zero CIBIL score means no credit history, bad credit indicates irresponsible credit behaviour.
4. Which credit score is OK?
A credit score above 700 is OK to get the best credit deals.