CIBIL Score: Importance of Credit Rating and How to Check

  • Published on: 8 Feb 2024
CIBIL Score: Importance of Credit Rating and How to Check

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. 

What is the CIBIL Score?

Before assessing the importance of credit score, know these crucial pointers:

  • A CIBIL score is a 3-digit numerical summary of your creditworthiness
  • The number varies between 300 and 900
  • The institution collects credit data from lenders periodically and analyses your credit profile 

See the table below to understand the credit score range:

Score Approval Probability 
900-750Highest 
749-700High
699-650Average 
649-600Low 
<600Difficult 

Your CIBIL score is calculated based on the following factors:

  • 30% of Payment history 
  • 25% of Credit exposure   
  • 25% of Credit type and duration  
  • 20% of other factors 

Importance of CIBIL Score

Here are the factors that best describe the importance of credit rating when applying for any type of loan. 

Creditworthiness

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!

Approval Speed

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.

Loan Amount

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.

Tenure

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. 

Interest Rate

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.

Negotiation Power

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. 

Numerous Credit Card Offers

You can enjoy better discounts, cashback, higher credit limits and many other benefits with an optimal score. 

How to Check Your CIBIL 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:

  • Step 1: Visit the CIBIL website 
  • Step 2: Click on ‘GET FREE CIBIL SCORE & REPORT’ 
  • Step 3: Enter your personal details, such as email address, first name, date of birth, ID, mobile number etc. 
  • Step 4: Click on ‘Accept and Continue’ to view your CIBIL report

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.

The score analyser feature helps you assess the factors influencing your score. Based on this, you can take measures to improve the score. You can also track your progress on the ‘You vs Best’ section, which shows your improving credit rank compared to other Fibe customers. 

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.

FAQs on CIBIL Score Importance 

What is CIBIL and its importance?

CIBIL stands for Credit Information Bureau (India) Limited. Here is why it is important:

  • This is the oldest credit bureau to get a licence from the RBI
  • This collects your credit information to generate the score
  • The institution helps lenders analyse their credit status
  • Lenders rely on the CIBIL score before approving a loan

Is it necessary to have a CIBIL score?

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.

What are the advantages of having a good CIBIL score? 

Having a 750+ credit score allows you to enjoy many advantages when applying for credit, such as:

  • Lower interest rates
  • Higher loan amount
  • Longer tenure
  • Better credit card offers
  • Quick approval
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