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Credit score – How credit score works in india

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Credit score is a 3 digit summary of your credit history which indicates your financial health. It will tell your lender or bank, how likely you are paying your debts dues based on your past repayment history.

When you apply for a bank loan, the banker will first check your credit score with CIBIL. CIBIL or Credit Information Bureau Limited is known as India’s first Credit Information Company founded in the year 2000. This company collects and maintains records of an individual’s payments pertaining to loans and credit cards.

Credit score are generally obtained from CIBIL. These reports are also called CIBIL report. Credit information bureau (India) ltd is licensed by RBI and governed by the Credit Information Companies (Regulation) Act of 2005.

Credit score – How credit score worksBased on the information submitted by banks and other lenders, CIBIL prepare reports and credit score which enable the lender to evaluate your past financial history to approve the loan application.

Credit score ranges from 300 to 900 points and is derived from your credit history. If you have high credit score then there are more chances of getting your loan approved.

If you have a low credit score with CIBIL then your application may get rejected. Higher credit score will take your loan application to the next process.

There are several ways of improving your credit score to help you in getting a loan approved. Here are some tips which will help you to improve it;

  • Pay your financial dues in time
  • Always keep your balance low
  • Watch your co-signed or guaranteed or joint accounts
  • Review your past financial history before applying for a loan

CIBIL reports are prepared based on the data that are received from banks or financial institutions. This means, if you want to correct credit score or CIBIL report then you need to contact the bank or financial institutions from where you have taken a loan.

What credit score means to you

Credit scores and index are meant to take a decision whether to approve a loan to the customer or not. Scores are measured either by credit scored within the range of 300 to 900 or points within the range of 1 to 5.

Score and Index Interpretation
300-900
  • An individual with a financial history of more than 6 months (in the last 24 months)
  • Higher the credit score, lower the risk
  • Credit Score greater than 700 is considered as a good score
1-5
  • Individual has a credit history which is less than 6 months, hence a risk Index is returned
  • Higher the index, lower the risk
NA or NH
  • Individual has no credit history & it has not been reported to us.
  • Individual has no history but has only been inquired upon
  • nothing has been reported in the 24 months prior to inquiry.