Status as on- 15/11/2021
Introduction
It is important to have all pertinent information before applying for a loan. It is not only improves chances of your loan being approved but also increases your credit worthiness. While applying personal loan there are many factors which are required to be taken into consideration such as interest rate, other fees and charges. There is also a very important factor named as credit score that plays a vital role.
Credit score is also named as CIBIL score that is representation of credit worthiness based on your history of credit repayment.
What is CIBIL ?
CIBIL stands for Credit Information Bureau (India) Limited which is a part of “Trans Union” an American Multinational Group. It maintains credit files of millions. TransUnions majorly trusted by banks and financial institutions because of its significant efficiency and demand in the Indian financial sector.
As from above it is clear that CIBIL is an organization which gathers and maintain credit information of customers and make it available to lenders, borrowers and all the requisitioner.
How CIBIL works and why it is important?
- It is a duty to all the Banks and financial institution running in Indiato furnish monthly reporting to CIBIL about their borrowers’ credit history for further dissemination to lenders for credit evaluation.
- Based on such credit information from banks it is clear that whether borrowers had repaid the loan, credit cards bills, etc. on time or had defaulted in either repayment /interest payment.
- CIBIL analysis credit worthiness of prospective customer who approaches any lender for availing credit and rate them based on CIBIL’s internal rating parameters.
- CIBIL RANK –It is a special facility designed only for customers that have outstanding loans of Rs. 10 lakhs to Rs. 50 crores in which CIBIL provides a Rank ranging from 10 to 1. It can be obtained only by the lenders for taking rational decisions but subject to non disclosure to any third party and by the company itself. A score of 10 is considered to the worst and 1 is the best.
- It is to be noted here thata CIBIL score is a three digit numeric score of your credit history ranging from 300-900. It is commutated by the credit evaluation and enquiries made by lenders on behalf of borrowers. The Score recommended the ‘probability of default’ by the borrower in future.
- CIBIL score is not only useful for the lenders but also for the customers in planning their credit requirements accordingly.
- Score attained closer to 900 chances are very high that your loan application will be approved and lower the score poor chances of approval of loan application. It is important to note that nearly 90% of individuals’ loans are granted with score greater than 750 which is considered to be a fair score in most of the cases by the lenders.
- CIBIL Score impacts your borrowing power because a good CIBIL score may fetch you credit at comparatively lower prices.We can say that it is forecasting future based on historical data of borrowers.
Conclusion-
It is to be concluded that how important is the CIBIL score when you are going to apply for a loan for your business or a personal loan or even a small credit card application. It works as a first impression for the lender. Hence it is very crucial to keep your CIBIL score good so as to not to face any rejection of credit application.
Disclaimer- The above article is based on the personal interpretation of the related orders and laws. The readers are expected to take expert opinion before relying upon the article. For more information, please contact us at rera@centrik.in
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