Your CIBIL score is a critical component lenders use when considering loan applications. As a result, it's essential to comprehend how the score is determined. The Reserve Bank of India has stated that all lenders must examine their new CIBIL score. The score can be seen in your CIBIL report, which is a record that describes your credit history. While your CIBIL score is determined by a proprietary algorithm, the essential components of the score structure are based on an individual's loan payment behaviour.
Don't be surprised if your TransUnion Cibil credit score has dropped during January 2020 and now. The credit information corporation (CIC) has altered how it evaluates debtors. Many people's credit ratings may have dropped since the start of the calendar year due to the new scoring system. So, let's delve deeper into understanding credit monthly CIBIL score and the factors impacting them.
Did you know? CIBIL is not a government entity. It is recognised by the Central Bank, and it is governed by the Credit Information Companies (Regulation) Act, 2005.
What is the CIBIL score?
Your CIBIL score is a three-digit numeric summarisation of your credit history that is calculated using information from the 'Accounts' and 'Enquiries' parts of your CIBIL report. Such as (but not limited to) your borrowing accounts or credit cards, payment history, as well as outstanding amounts' days past due. Based on your borrowing and ability to repay as lenders provide, the score represents your creditworthiness. Your CIBIL score ranges between 300 to 900, and the better your score, the more likely it is that you will be accepted for a loan. In reality, borrowers with a CIBIL score of 750 or above receive 79% of loans.
What is the new CIBIL score?
- The new CIBIL score will provide different advantages at each step of the credit lifecycle.
- The information contained in the CIBIL Report has not changed. The only difference is how the computer uses this information to generate your CIBIL score.
- Individuals who have already taken up loans will benefit from the new CIBIL score since it gives a more comprehensive view of their credit activity. This has been accomplished by expanding the length of credit and payback history used to establish the score.
- The new CIBIL score will enable lenders to extend loans more frequently and better by identifying individuals with credible scores.
- The new CIBIL score also considers small differences in credit profiles and customer payback behaviour to assist lenders in evaluating risk profiles more accurately and potentially lending to consumers who would have previously been rejected credit.
- The new CIBIL score ranges from300 to 900, the same as the old CIBIL Score.
- However, because the CIBIL Score scoring system has been altered, the numeric number provided for the new CIBIL Score may differ from the numerical value created for the previous CIBIL Score.
Old CIBIL Score
New CIBIL Score
Based on the credit history of only 24 months
Based on the credit history of 36 months
Before earning a numerical score, they had to have 6 months of credit history.
Based on the credit history of only 24 months
How to see the new CIBIL score?
- Your CIBIL panel has already been updated with your new CIBIL score. To access your new CIBIL Score, please log in to your account using your login details.
- Every time you update your CIBIL assessment, you see the new CIBIL score as part of its commitment to offer you the most up-to-date and relevant information on your credit history.
- You will receive the new CIBIL Score with your free yearly credit report.
- On your profile, your recent CIBIL Score is displayed. As a result, the current CIBIL Score displayed is the new CIBIL Score. With a current CIBIL Score subscription plan, you will get to see your prior version of CIBIL Scores (up to 12 months) in the score record part of the dashboard.
- All of the partner banks and credit agencies are also in the course of switching to a new CIBIL Score, and once completed, there will be only one version of the CIBIL score that everyone in the market will use, streamlining the overall credit assessment process.
Also read: What is CVV Code in Debit and Credit Card?
Factors affecting the new CIBIL score
In addition to credit usage, payment history (number of late payments and amount of outstanding payments), loan applications, and credit mix, the revised CIBIL Score includes new variables like:
- Creditworthiness (i.e., the extent of the current credit history as measured from the opening date of the oldest credit account)
- The absolute figures, as well as qualitative qualities of these indicators in your credit report, might influence your new CIBIL score, either positively or negatively.
- The number of new accounts established and the number of terminated accounts
- Outstanding balances' long-term trend
- Credit card transaction history
- The proportion of actual payback to the total amount owed.
Impact of new CIBIL score on loans
- The numerical value of the new CIBIL score differs from the previous CIBIL Score due to variations in the scoring methods utilised to create each score. As a result, even with identical information on the CIBIL Report, the new CIBIL Score may generate a lower numeric score than the previous edition.
- This decrease in the numeric value of your new CIBIL Score does not imply that your credit record has degraded and should not affect how lenders consider your credit application.
- The introduction of the new CIBIL score should not affect the lenders' decision to approve or deny your loan application. Refer to your banks' specific credit rules for a fuller understanding.
- The credit institution's credit policy exclusively determines the decision to approve a loan. Lenders' score cut-offs for the previous CIBIL Score and the new CIBIL Score may differ. If your loan application were examined based on the new CIBIL score, the lenders would already have a CIBIL Score cut-off determined.
What is a good CIBIL credit score?
- The CIBIL credit score goes from 300 to 900.
- Typically, a credit score of 750 is deemed appropriate. A basic score of 750 or above awards you the prestigious title of 'Excellent.' This, in turn, might assist you in negotiating better loan conditions.
- If you have a good credit score, the loan application will be easy to complete, and your loan will be processed faster.
- However, if your credit score is less than 300, the lender will see you negatively. So, if you want a credit card or a loan, you will most likely have a difficult time.
- Currently, lenders will limit you if your credit score is low by asking you for high-interest rates on loans.
- You will be disqualified for numerous services if you have a low credit score. If you want to take out a loan, banks and financial institutions will either refuse or reduce the amount they are ready to grant you.
- Your bad credit score may also lead to a higher interest rate, as well as other hidden fees connected with a loan.
- Your credit score is an important factor in loan approval. Depending on the credit score, a bank will assess how much interest to impose on the loan you wish to accept.
- These reports include your basic information, prior payment history, any late amounts, details of every previous credit you have taken, and the number of queries made on you by various lenders. This information is all valuable.
- For instance, if you have made a massive number of enquiries with several lenders, it indicates that you have contacted many lenders for loans, regardless of whether those loans were taken or not. This isn't a good sign.
- It's also worth noting that not all creditors define a "good" credit score the same way. For example, a CIBIL score of 670 may be appropriate for some lending institutions, but others may reject a loan application with this score.
- 80% of all new loans are approved with credit scores beyond 750. The higher your score, the more likely lenders will assess your application favourably.
How can you improve your CIBIL score?
Your new CIBIL score is established on your credit records and past transactions, but it also influences your future credit access. What you do now can help you develop a stronger and better credit footprint in the future. Here are a few pointers to help you raise your score:
- Examine your credit report regularly throughout the year. Keep an eye on your new CIBIL score and report it regularly.
- Regularly reviewing your report will also expose you to any potential errors. If you find a difference, you can file an objection on the CIBIL site or ask the lender to amend it and report it to CIBIL.
- Keep an eye on your co-signed, assured, and joint accounts every month. Note that with co-signed, guaranteed, or jointly held accounts, you are considered equally accountable for late payments, and your co holder's (or the guaranteed individual's) irresponsibility might impair your capacity to obtain credit when you need it.
- Pay your bills on time every month. Lenders perceive late payments negatively.
- Don't overextend your credit, and keep track of your usage.
- Maintain a good credit mix of secured (such as a house loan and an auto loan) and unsecured (such as credit cards) loans – too many unsecured loans may be looked at adversely.
- Apply for new credit with caution. This demonstrates that you are not always seeking extra credit.
You may require credit to attain your financial objectives or in the event of an emergency. To ensure that you are credit-ready, regularly keep an eye on your CIBIL score and credit record. Begin working toward a higher score right now.
Your CIBIL Score is among the factors lenders consider when evaluating your credit application. The new CIBIL score is being implemented by all of our participant banks and credit institutions. However, some may continue to implement the previous version of the CIBIL Score while the migration to the new score structure is ongoing. As a result, the CIBIL Score used by the lender to evaluate your loan request (old CIBIL Score) may differ from the CIBIL Score displayed on your panel (the new CIBIL Score). This discrepancy, however, should have no bearing on the lender's decision to accept or deny your credit application.