What is a CIBIL score? Why is it important?

When you go to any bank in order to apply for a loan, the bank will look at your CIBIL score. 

Not just banks but any organization that you approach for a loan, will look analyze your credit standing or credit history by looking at your CIBIL score.

If your CIBIL score is good, then the bank or the financial institution will look at the other elements and consider granting you the loan.

If your CIBIL score is not up to the mark, the bank won’t even bother to look any further regarding your loan application.

So what is a CIBIL score? And why is it so important?

CIBIL is the abbreviation for Credit Information Bureau (India) Limited. It is also known as CIR , that is Credit Information Report.

CIBIL score is a three digit score that usually ranges from 300 to 900. The scale is 300 being the smallest or the worst case and 900 being the best case scenario.

Generally speaking, if you have a CIBIL score close to 800, you are doing really great in keeping a good financial profile as far as the banks are concerned.

A CIBIL score above 600 is not too bad either.

Anything that falls below 600 is not good and will not help you!

A CIBIL score is calculated using a specific algorithm that’s applied on various financial factors of yours from various sources.

The sources include banks, government organizations, credit card companies, finance companies and the like:

• Your score is calculated using various elements like
• your income sources, your savings and investments,
• your credit card standing – that is how well you pay your credit card bills,
• about whether you have credit card loans and how you pay that loan EMI,
• about the other loans you have and how well you pay those loan EMIs, and so on.

Now, your CIBIL score is not calculated instantly. It takes a while for the score to build up – like anywhere from 18 -36 months.

Also when you approach a bank for a loan, usually they check your past 6 months’ CIBIL score data.

So it is important that you maintain a good CIBIL score in recent times, if you are into applying for a loan!

As to how you can maintain a good CIBIL score or how you can increase it, if it is low is a topic for another video. 

I will publish that video and will provide the link to it in the description box as well as in the card.