What is CIBIL, and what does it have to do with your credit score

When managing your finances, few things are as important as understanding your credit score. Irrespective of whether you are looking to get a loan, apply for a credit card, or even make big financial decisions, your credit score has the power to influence the outcome. Behind every credit score, there is a system that tracks your financial habits and evaluates your creditworthiness. One of the most prominent names in this process is CIBIL.

Understanding CIBIL
 

So, what is CIBIL exactly? CIBIL stands for Credit Information Bureau (India) Limited. Founded in 2000, it’s India's leading credit information company. CIBIL's main function is to gather financial records from banks, analyse it, and generate credit reports. Currently, CIBIL maintains credit records for over 600 million individuals and 32 million businesses.

What does CIBIL have to do with your credit score?
 

Now that you know the CIBIL meaning in detail, let's understand its connection with your credit score. The CIBIL report includes information about your payment history, outstanding loans, credit card usage, and more. The way you manage these financial responsibilities determines how high or low your credit score is. Take a look below:

• Timely payments on loans or credit cards positively impact your score. Late payments, defaults, or missed EMIs (Equated Monthly Instalments) reduce the score.
• How much credit you use from the total available credit also affects your score. Ideally, it is advisable to keep the credit utilisation below 30% of your total available limit. 

Having a balanced mix of secured (like home loans) and unsecured loans (like personal loans) and a longer history of prudent credit use boosts your score.

• Numerous credit inquiries within a short duration can indicate credit hunger and may lower your score. 

Why does your credit score matter?
 

Even though there are many benefits of a strong credit score, the two most crucial are: 

Quick approval to credit options:
 

A high CIBIL score signifies that you are a low-risk borrower and can manage debt responsibly. This means your loan application could be approved without any hassles. For example, if you have a credit score of 730 and above, IDFC FIRST Bank's FIRSTmoney, a smart personal loan, can get you a loan offer of up to ₹10 lakh.

Your FIRSTmoney loan offers you quick access to funds at an affordable rate and transparent terms. Moreover, the borrowed funds can be repaid between 2-60 months. Apply online via a 100% digital process today and get quickly approved for a FIRSTmoney loan!

Approved loan on credit cards:
 

A good credit score increases your chances of getting approved loan offer on your credit cards. This approved loan means you can make large expenses without maxing out your card and improve your credit utilisation ratio.

Ending notes
 

CIBIL plays an important role in determining your financial credibility. As a leading entity responsible for tracking and evaluating your creditworthiness, CIBIL's report impacts your ability to secure loans, credit cards, and favourable terms from lenders. This explains why maintaining a high score is non-negotiable. So, make sure to prioritise timely payments, manage your credit wisely, monitor your credit report regularly, and practice other healthy financial habits.