How To Read Cibil Report



 

Does your CIBIL report look like Latin to you? Well not anymore. We are here to help you to show how to read CIBIL report, understand your report and improve it too. Read on to make sense of the numbers on your CIBIL report.

Imagine that you are giving an important exam. Would you not like to know the pattern in which the exam paper is set? What are the marks allotted to each question? Which of the topics are more important and require extra attention while studying? On what basis will the examiner mark you? Is there negative marking. for instance? Similarly we need to understand and know how to read the CIBIL report to figure out where the score can be improved.

CIBIL’s Transunion score is a three digit number that the equivalent to marks that you get in an exam. Often due to blunders and ignorance, your credit score can be very poor. Luckily, the score can be improved and CIBIL regularly re-examines the elements of credit report and adjusts the CIBIL score to reflect it. So if you are looking to improve your CIBIL score you need to understand the scoring pattern and.

There are 5 parts to your CIBIL report that you need to know how to read.

  1. Actual Score

Your score is shown at the top of the report on a scale. Score of people with credit history longer than 6 months are between 300 and 900. The higher the score, the better your credit report. An ideal score would range between 800 and 900. If your score is below 700, it is time take a serious look at your finances and make some important changes. CIBIL has also provided for a risk index for people with less than 6 months of credit history. They will be graded on a risk index ranging from 1 to 5, where 1 would mean highest risk and 5 would mean lowest risk of default.

  1. Personal Data

This section has nothing to do with your score, it is just information available for the creditor. It includes the borrower’s name, date of birth, gender, PAN card details, other identifying proof details that have given for the Know Your Customer (KYC) norms including address and contact numbers.

  1. Employment information

Again this section does not affect your score. It gives the employment information that has been mentioned while applying for the loan or credit card. At times lenders give preferential rates or pre-approved loans to borrowers working for certain employers such as large Indian or Multinational Companies.

  1. Account information

This is the juiciest and longest part of the report that you should know how to read. It is where different elements affect your score, pushing it up or bringing it down.

  1. Enquiry information
    This is a list of all of the people who have enquired about your credit: yourself, a lender, or any other authorized organization. Multiple “Hard” enquiries bring down the credit score they are enquires which come to CIBIL from lenders when you apply for a loan or a credit card. “Soft” enquiries do not affect your credit score. These soft enquiries generate when you ask for a report or a lender asks one without an application from you.

To build and maintain a good CIBIL score report you need to understand what goes into that builds your credit score. Below are few significant facts that make your CIBIL score report:

1.Your repayment history

One of the main constituent of your CIBIL score report which contributes about 35% of your score report. The ground rule says if you wish to have score more than 750+ make sure to do timely repayments. It is advisable to automate the process.

2.Understand what goes into the making of CIBIL score

To build and maintain a good CIBIL score you need to first know what goes into making it. So here are the things that make your CIBIL score:

3.Credit utilisation ratio

This is another important constituent of the CIBIL score and contributes to 25% of its constitution.

To explain in simple language, the credit utilisation ratio is nothing but the total amount of credit you use as opposed to the total amount of credit you have been authorised. Financial experts suggests that an individuals should always try and keep your credit utilisation ratio at 25 to 30 % to maintain a good CIBIL score report.

4.How old is your credit

The age of your credit is another primary factor that influences your CIBIL score report. It contributes about 15% of your score report. Although; an individual is not expected to have a long record or credit history right from the start it is important to make timely repayments on your credit cards. Having multiple loans as well as credit cards are not good for your CIBIL Score report.

5.The mix of debt

This is a factor that contributes 10 per cent to the constitution of the CIBIL score. It is advisable to maintain a good mix of secured and unsecured lines of credit in order to gain brownie points on this factor.

6.The number of inquiries that your lenders make

You may be surprised to learn that each time you make an application for a new loan or a credit card, the concerned lender makes a request for your CIBIL score and report. This is what hard inquiry means. Each time there is a hard inquiry on your CIBIL score report, your CIBIL score takes a hit.

Too many hard inquiries make an impression that you are credit hungry and will make any lender wary of giving you a loan or a credit card. Therefore; unless and until you absolutely need a credit card or a loan, do not apply for one.

7.Choose your first credit card well and avoid further temptation

Credit cards come loaded with a lot of rewards, cash benefits, and offers but; those are not the only factors that should influence you to get your first credit card. Make sure you carry out good amount of comparisons and choose the best credit card in terms of interest rates, fees and rewards that are most relevant and significant to you. Once you have taken your card, your temptation test begins.

While it may seem easy to get carried away and overspend on your card, bear in mind that spending beyond your means is the first thing that leads to a debt trap. Therefore; the ground rule of using credit cards is never to buy anything on the card that you cannot afford to pay back in cash over the billing cycle.

Your credit history will affect how your credit score will turn out. Credit score is computed based on a formula that grades 5 different aspects which include:

  1. Payment history,
  2. Available credit balance in your account,
  3. Credit utilisation,
  4. Balance between your secured and unsecured loans, and
  5. The number of loans and credit cards you have.

The credit score looks at both the positive and negative facets of your credit data. It doesn’t matter if you’re in a lot of debt. It is still possible for you to have a high score, provided you are diligent with your payments. One might think that if you have no credit cards or accounts (i.e. no debts), you should have a high score. However, you would most likely have a low score. This is because there is no data supporting how well you can repay, thus making you a high risk borrower, thanks to ambiguity.

Credit scores are calculated by credit bureaus with the help of an algorithm. Your credit score not only helps lenders assess your loan eligibility, but also helps them understand if you are worthy of credit. The higher your credit score, the higher are your chances to get your loan approved.

Credit scores range from 300 to 900. The closer you are to 900, the greater is the chance of your loan getting sanctioned. A higher credit score indicates that the credit institution is more confident in your ability to repay the loan. As a general rule, anything above 750 is considered a good credit score. All banks usually look at the credit score as one of the many checks they do before advancing a loan.

How To Get A Personal Loan Despite A Low Cibil Score?

There are 4 credit bureaus in India authorized by RBI: 1) CIBIL 2) Experion 3) Equifax 4) High Mark Credit Information Services. The most popular of these is CIBIL. You can choose to get your credit score online from the official websites of any of these bureaus.

How is credit score calculated?

The credit score (commonly also called the CIBIL score in India) is calculated based on a number of factors, especially your payment history. In addition, your credit score is also calculated based on the following aspects:

  • Your total available credit balance.
  • Balance between your secured and unsecured loans.
  • Number of loans and credit cards you have.
  • Credit utilization.

CIBIL score rank – How Lenders see you

800 +: Exceptional

A credit score of 800 and above is considered exceptional. Borrowers within this range will more than likely not have any problem in getting a loan.

750 to 799: Very Good

Practically automatic approval along with the lowest rates on whatever you apply for including, automobile loans, credit cards and even lower insurance rates.

700 to 749: Good

Good chance of being approved for credit with competitive interest rates. Even though this is a pretty good credit score, there may be some lenders that offer slightly higher rates and less favorable terms than they would offer consumers with a better credit.

650 to 699: Fair

Good chance of being approved for credit with competitive interest rates. Even though this is a pretty good credit score, there may be some lenders that offer slightly higher rates and less favorable terms than they would offer consumers with a better credit.

600- 649 and blow: Poor

Scores in this range indicate serious financial problems and action needs to be taken. Lenders will deal with you with extreme caution. It will be difficult to secure unsecured personal loans and major credit. The credit cards available to you will also be very limited.

599 and blow: Very Bad

Scores below 599 is considered very bad. No established and credible financial institution will provide credit to person with these scores. It will be almost impossible to get any kind of loan at these scores.

Here Are A Few Other Things To Know About Credit Scores:

  1. Credit reports are different from credit scores

Sometimes these words are wrongly interchanged. Credit scores are calculated using the information on your credit reports. Credit reports contain details of your credit accounts, how often you apply for credit and debt collection accounts, among other things.

  1. There are many different scores & there are different credit score ranges, too

When you’re trying to figure out where you stand in terms of improving your creditworthiness, make sure you are comparing the exact same score. Also, ensure you know the correct range to avoid any confusion. For example, a 750 score in Experian, (which is another credit bureau that measures your credit score) might not necessarily be equivalent to a 750 in CIBIL.

  1. Your credit score can cost you lakhs over a lifetime

A low credit score means you’ll probably have to pay higher interest rates on things like credit card balances and loans. You can see an estimate of how much your credit will cost you using any Lifetime Cost of Debt Calculator.

Final Thoughts

Building and maintaining a good CIBIL score report, is no rocket science but; young people tend to fumble in their credit usage and that does considerable harm to their CIBIL scores. If you are conscious about your physical health and do everything possible to keep in ship shape, maintain financial discipline and you will see that your financial health is in order too.

Besides armed with a good CIBIL score you are most likely to get a loan or credit card whenever you are in need of one.

 
 

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We have a dedicated staff devoted to assisting you with your future financial needs.
We provide advice and information on how to best manage your current credit to maximize the impact to your qualifying ability.
 
 

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