What Is A Credit Score/Cibil Score?

What does it mean?

Knowing the credit score and understanding the CIBIL score meaning is crucial if you plan to take a loan. A credit score is an indicator of your eligibility to get a loan or any form of credit. Credit bureaus in India consider several financial aspects to calculate the credit score, which ranges from 300 to 900. 

TransUnion CIBIL is one of the four bureaus that generate the credit score, popularly known as a CIBIL score. It is India’s first credit bureau and was incorporated based on the recommendations of the Reserve Bank of India (RBI) Siddiqui Committee. 

If you have a good credit history, experience with different types of credit and demonstrate responsible repayment behaviour, you will have a higher CIBIL score. This makes you a creditworthy individual as per banks, non-banking financial companies (NBFCs) and other financial institutions.

Points to remember

1. Credit scores are generated based on at least the past 6 months of your financial data. Hence, ensuring consistent on-time payments will generate a high score.
2. A borrower’s existing loan obligations must be low. A high loan balance indicates poor credit usage and hence reduces the score. 
3. You must have experience with both secured and unsecured debt to build a high credit score. 

Example: A credit score of 600 implies that you have been struggling to make payments. While you may still get credit from lenders, it may come at higher interest rates that increase your overall loan borrowing costs.

FAQs on the Credit Score

What is the meaning of the CIBIL score?

CIBIL score, generated by TransUnion CIBIL, is a three-digit score that indicates your creditworthiness, i.e., whether you are a high-risk or low-risk borrower. It ranges between 300 and 900 and a higher score indicates that you are a responsible, low-risk borrower. 

While a high score gives you easy and affordable access to credit, a low score can restrict that access.

What is the CIBIL score in full form?

The full form of the CIBIL score is the Credit Information Bureau (India) Limited score. TransUnion CIBIL is one of the credit bureaus in India that generates credit scores of individuals and shares the data with banks, NBFCs and other financial companies.

What is the credit score requirement in India for personal loans or any other loans?

The requirements for a CIBIL score in India vary depending on the lender and the type of loan you want. Generally, lenders require a credit score of 750 or above to offer you affordable credit. However, there are some lenders, like Fibe, who do not rely on your credit score to calculate your loan eligibility. Instead, they use an Alternate Scoring Mechanism to assess your eligibility. Fibe also caters to those who are ‘new to credit’.

Is the credit score and CIBIL score the same?

The credit score is a general term for the 3-digit score calculated by all credit bureaus. However, a CIBIL score refers to the score calculated by TransUnion CIBIL.

What is the CIBIL score eligibility for a loan?

The minimum requirement depends on the lender. Generally, banks and NBFCs prefer a score above 720. However, there are some lenders who do not rely on credit scores, like Fibe.

How to generate a CIBIL score for free?

You can generate one free report every year on the TransUnion CIBIL website by following these steps.

Step 1: Visit the TransUnion CIBIL website

Step 2: Create your account with the required details (name, birth date, ID proof)

Step 3: Verify your account and log in

Step 5: Navigate to ‘My Account’ and click on the ‘Get Your Free Report’ tab

The link will not be available if you have already generated your report. Instead, you can see the score and report as of the date you generated it. To create a new report, subscribe to a plan and pay a certain amount.

How to calculate the CIBIL score for a personal loan?

To calculate the CIBIL score for a personal loan, you have to analyse certain factors. Here are some of them:

• Your recent credit enquiries
• Your credit utilisation ratio
• Your payment history
• The length of your credit

Based on the aforementioned criteria, your CIBIL score is calculated. You must meet the lender’s score requirement and other parameters to qualify for a loan.