One of my friend, Vivek, had applied for a housing loan from one of the leading private sector banks. However, he was quite disappointed when he got a call from the bank that his CIBIL score was good enough to pass the internal appraisal process of the bank and therefore, the loan cannot be sanctioned to him. Upset and equally annoyed with his loan rejection, he called me up. I explained to him about the dynamics of the CIBIL score and while I also checked his CIBIL report online, I found out that it was not a presence of bad credit history that made his score low, but it was indeed the absence of a good credit history. He later told me that indeed he used to reluctant to use any credit cards and rely only on his cash balances in banks.

Even though this is a good financial habit, it worked against Vivek as the bank had no records to check his repaying tendency, inspite of having the repaying ability.

While Vivek is now applying for a credit card to have some credit record and apply for a housing loan a few months later now, I deemed it fit to share the dynamics of CIBIL score here in this post.

Here are four things you must know about the CIBIL Score:

What is CIBIL Score?

CIBIL Score is nothing, but your credit history containing the details of all your debts/ credit cards and its repayment history. It is one of the most important parameters for the bank to consider giving you a loan, as it provides an insight to the bank for the repaying habits of the borrower.

How is CIBIL Score Measured?

The information provided by various financial institutions to credit information bureaus including CIBIL etc. is used to give scores to the borrower on the basis of accepted methodology. The score ranges from 300 to 900 with the 300 score for the borrower with the highest risk of default and 900 for the borrower with the lowest risk.

How to Have a Good CIBIL Score?

Repayment history carries the highest weight amongst various other factors affecting your score. Further, a higher number of credit cards/ personal loans tend to lower your credit score. Similarly, a healthy credit mix of unsecured loans with a few secured loans like housing loan, car loan etc. reflect your tendency to manage your finances better, and ultimately resulting in higher credit score.

How to access the CIBIL Report?

Earlier, the access to the report was only available with the financial institutions and the individual could know about the adverse credit history only through the bank. However, lately, the market regulator had instructed Credit Information Bureaus to provide credit history with an intent to inculcate healthy credit habits. As such, now CIBIL report can be requested from their website. The report request comes with a nominal charge, but as a healthy practice, it is provided for free once in a year.

Do make sure to monitor your CIBIL Score regularly. If you have not availed for the free report in this year, you may request for your free report by clicking here. Leave your thoughts in the comments below.

Check out the A2Z of Personal Finance here.

2 thoughts on “CIBIL Score – Credit History of your debts

  1. Non maintenance of minimum bank balance would also taken into account in the Credit Score if the bank has sent the information to the CIBIL body. Hence please sure you maintain minimum account balance in your bank and close all non functional bank accounts.

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