What are the benefits of a good CIBIL Credit Score?

What are the benefits of good CIBIL Credit scoreWhat are the benefits of a good CIBIL Credit Score?

I’m sure most of you must have watched the T.V commercial where a loan aspirant is welcomed not because of his “connections” or “name” but because of his CIBIL Score. Yes! Welcome to the new world of loans and debt. What is CIBIL Report ? What are the benefits of keeping a good CIBIL Score?

What is CIBIL Score and CIBIL Report

CIBIL or the Credit Information Bureau (India) Limited is India’s first credit bureau. A credit bureau serves as a central repository or a storehouse that has details about the credit history of borrowers (retail and commercial).  Thus, based on the credit history, loan details, repayment schedule attach a score is arrived at; this score helps the lenders in their decision making process. In a nutshell the Credit Score is an estimate of the borrower’s credit worthiness; based on which lenders filter out undesirable candidates.

The CIBIL Score is a three digit which falls within 300 to 900 range. This number is arrived at by taking into consideration information from various lenders and about various types of loans/debts. So if you have a personal loan from ABC Bank and a car loan from the XYZ Banking Company, information about both these loans will be reflected in your Credit Score. Similarly your credit card histories will also be a variable in reaching the final score.

Also Read: 10 Ways to boost and improve your CIBIL Credit Score?

How CIBIL Credit Score is computed?

The score is calculated by an algorithm without any manual intervention or human bias based on the historical data. At least six months history is required for this score to be calculated. The score is calculated using 258 variables and each variable is given a different weight. Individuals as well as lenders can get the score from CIBIL. The person for whom the credit score is calculated can get in touch with CIBIL dispute cell in case he/she is dissatisfied with his score.

What does a Credit Report contain?

A Credit Report has basic information like name of the individual, his/her personal details (DOB, address, etc.), bank details, loan details, credit card information (overdue amount, credit limit, last payment details and so on), number of times the report has been asked for by the creditor and reason for doing so.

What are the benefits of a good CIBIL Credit Score?

You may think that only lending institutions benefit from CIBIL Scores as it helps in ascertaining which applicants to accept and which to reject. It’s important to mention here that apart from the CIBIL Report the lenders will utilize their own risk management tools also to choose the right candidate as remember the CIBIL score is an indication of the applicant’s past behavior and not a guarantee for the future conduct.

The CIBIL Score has a lot of benefits for the applicant or the individual too. Let us see how a good CIBIL score benefits you. 

1) Sanction of loan: First and foremost a bad CIBIL score means that the loan application will get rejected right away.  Generally a score above 800 is considered to be good. But banks may have different cut off levels and some banks accept a score of 750 and above too for granting a loan. As per the CIBIL website 90% of the loans are sanctioned to those who have a score of 700 and above.

2) Negotiate for low interest rates: A good score can help you in saving money too.  Though not true for all lending institutions a good credit score can help you in negotiating lower interest rates.

Also Read: How to get Online CIBIL Credit Score in India?

3) You can get waiver from processing fees: Some banks may agree to waive of the processing fees or the prepayment facility. As said earlier, it is not a done deal, with a good credit score; it depends on your negotiation and the bank’s rules and willingness. A good score does give you a bargaining chip so you could get some other waiver or try another bank/institution. A high credit report, however does guarantee one thing speedy processing of your loan and lesser turnaround time. So a good CIBIL score ensures that you will not have to lose out on an opportunity because the loan got delayed.

So make sure that you make your credit card and loan payments on time because even a day’s delay can prove to be expensive for your future endeavors.

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About the Author

Nidhi Maini is an ex-banker and enthusiastic reader who also loves to write. Nidhi write for Credit Sudhaar – a credit health management company on topics pertaining to CIBIL Score, Credit Rating and tips on how to improve your credit score. Writing allows Nidhi to share banking and financial experience, express creative self and explore new subjects.


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