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CIBIL Score: Importance of Credit Rating and How to Check
- Updated on: 19 Sep 2024
- Published on: 8 Feb 2024
Understanding the importance of credit rating is the first step towards being smart in your credit journey. For any type of credit, financial institutions will check your credit score to evaluate your application.
This is because it gives them accurate information about your credit behaviour and ability to handle different types of credit. This, in turn, gives insights into your repayment capability. India has four reliable bureaus for generating credit scores, among which TransUnion CIBIL is the most popular.
Read on to know why CIBIL score is important, its benefits, how to check it and more.
Before assessing the importance of credit score, know these crucial pointers:
See the table below to understand the credit score range:
| Score | Approval Probability |
|---|---|
| 900-750 | Highest |
| 749-700 | High |
| 699-650 | Average |
| 649-600 | Low |
| <600 | Difficult |
Your CIBIL score is calculated based on the following factors:
Here are the factors that best describe the importance of credit rating when applying for any type of loan.
Most lenders depend on this three-digit metric to evaluate your financial standing. An optimal score of 750 or above enables you to get quick loan approvals. Remember, the score parameter varies from one lender to another. The higher the score, the easier the loan approval!
A healthy score ensures lower chances of defaulting on the loan. On the contrary, a lower score of less than 700 may take some time for lenders to approve your application. Hence, it’s ideal to maintain a good score for quick loan disbursement.
Lenders avoid giving higher loan amounts to borrowers with lower credit scores, as the risk of losing funds increases if they default. With an optimal score, you can get ample funding, provided you meet the required eligibility parameter.
A long-term loan has a relatively higher risk for the lender. So, you must showcase a spotless credit history to opt for a tenure of your choice.
This is inversely proportional to your credit score. Simply put, the higher the score, the lower the loan rate and vice versa. If your interest rate is less, your overall borrowing costs will also be lower.
Having a high score also guarantees that you get the loan on favourable terms. So, you can always negotiate for a longer tenure, better interest rates or a sizeable loan amount with a good score.
You can enjoy better discounts, cashback, higher credit limits and many other benefits with an optimal score.
While you are familiar with the importance of credit rating, checking your score regularly is crucial. If it is on the lower side, you can take the required steps to improve it.
Here’s how you can check your free score on the CIBIL website:
Following the steps, you can easily check your free CIBIL score. Alternatively, you can subscribe to a paid plan to review your reports regularly. The importance of credit score in getting a loan on favourable terms is paramount, as most lenders prefer a score above 750. You can use the Fibe CIR (Credit Information Report) tool, which instantly gives you an updated report for decoding your financial health.
Fibe Credit Score Analyser helps you to compare your credit score against Fibe’s best borrowers and understand where you stand. You can get to know the impact of your credit behaviour easily and tips on actions that can help you boost your score.
Head to the Fibe App today and begin your journey for better credit health!
You can opt for the Fibe Instant Personal Loan to bridge monetary gaps. When you apply with Fibe, we assess your creditworthiness based on an alternative credit score mechanism. This allows us to approve applicants with lower CIBIL scores as well. Download the Personal Loan App or visit our website to apply now.
CIBIL stands for Credit Information Bureau (India) Limited. Here is why it is important:
Yes. A CIBIL score helps lenders assess your repayment ability by gauging your financial standing. However, lenders like Fibe, use alternate scoring metrics to evaluate the eligibility of applicants.
Having a 750+ credit score allows you to enjoy many advantages when applying for credit, such as:
