CIBIL Full Form & Importance of Good CIBIL Score

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CIBIL Full Form & Importance of Good CIBIL Score

CIBIL full form is Credit Information Bureau India Limited. Now, this company is known as TransUnion CIBIL Limited. It is a credit information company regulated by the Reserve Bank of India. 

In this blog post, we shall discuss CIBIL, the importance of maintaining a good CIBIL score and more.

What is CIBIL Full Form?

CIBIL full form is Credit Information Bureau India Limited. It is the former name of TransUnion CIBIL Limited - a credit information company that operates in India. It was founded in 2000, and is the credit information bureau in the country. 

TransUnion CIBIL ltd is a part of TransUnion - an American multinational group. The company maintains credit files on millions of individuals and businesses. It is licensed by the Reserve Bank of India (RBI) and is governed by the Credit Information Companies (Regulation) Act of 2005.

What is CIBIL Score?

CIBIL score is a well known credit score generated by TransUnion CIBIL. Many banks and lenders use this score to evaluate an individual's creditworthiness for loans and credit cards. 

A good CIBIL score makes it easier for individuals to secure loans and qualify higher credit card limits. On the other hand, if your score is not good, then securing loans and getting higher credit card limits may be challenging.

Factors that Determine CIBIL Score

The CIBIL Score gets calculated on the basis of numerous factors, incl. the following:

• Payment History: During calculation of CIBIL score, payment history is an essential factor. In fact, it is the most important factor of all. So, make sure you pay your EMIs and bills in a timely manner. Doing this will allow you to maintain a good balance and increase your chances of higher CIBIL score. 

• Credit Utilization: A high credit utilization shows there’s a strong dependence on credit. Maintaining a credit utilization ratio of below 30% can help you secure loans more easily. 

• Credit Mix and Repayment Duration: Having a mix of secured and unsecured credit products incl. credit cards contributes to a healthy credit score. Additionally, a longer repayment period for credit products positively impacts your credit score. 

• Credit Inquiries: Credit inquiries are conducted for the purpose of assessing your creditworthiness. If you apply for multiple credit accounts in a short period of time, it can negatively affect your credit score. This pattern may be perceived as a sign of credit seeking behavior. Lenders do not favour this type of pattern.

Importance of Maintaining a Good CIBIL Score

Have you ever wondered why it is so important to maintain a good CIBIL score? Below, we have mentioned a few points through which you can understand that significance of maintaining a good CIBIL score:

• Increases Chances of Lower Interest Rates: If you maintain a good score, then the chances are that you qualify for credit cards and loans offering lower interest rates.

• Higher Chances of Approval: A good credit score means your chances of securing loan approval are higher. This is because lenders are more likely to view you as a low risk borrower and believe that you have the capacity to repay the loan.

• Better Rates for Insurance: Just like banks and non banking financial companies, the insurance companies too analyse credit scores to determine the amount of premiums that must be paid by the individual. If the credit score of an individual is good, then the insurance rates offered to them for health/life insurance can be significantly lower.

• Easier to Negotiate Terms and Conditions: When you have a good credit score, there’s no doubt that you’re the suitable candidate for banks and NBFCs to offer you a loan. Because of this, you feel empowered to negotiate the terms and conditions with the lender such as relating to higher credit limit or better loan terms.

How to Increase CIBIL Score?

There are many ways through which you can increase your CIBIL score. Some of them are explained below:

• You must showcase responsible financial management. For this, you must ensure you repay loan, credit card and other bills in a timely manner. This will significantly contribute to a good credit score.

• It is crucial to keep your credit card balance below your credit limit at all times. Excessive use of credit cards can have a negative impact.

• Keep checking your score regularly and watch out for any errors or fraudulent activity in your credit history.

• By having a varied credit mix that includes credit cards, home loans, personal loans, etc., you can improve your score.

• Outstanding debt will negatively affect your score until it is cleared. So, it is quite necessary that you repay your dues to improve your score. You can do this by sticking to your repayment schedule or making prepayments so you can foreclose your loan.

Conclusion

CIBIL full form is Credit Information Bureau India Limited, which is now known by the name of TransUnion CIBIL Limited. This company assesses credit worthiness of individuals and businesses. For loan and credit card approvals, CIBIL score plays an important role. This score also decides the interest rates for which a borrower is eligible. So, make sure to maintain a good CIBIL score at all times. 

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Frequently Asked Questions (FAQs)

Q1. What is CIBIL full form?

A. CIBIL full form is Credit Information Bureau India Limited. It is a popular credit information company in India. 

Q2. Which credit information company was the first to be established in India?

A. The first credit info company to be established in India was CIBIL. It was founded in the year 2000.

Q3. Which credit information company is the largest in India?

A. The largest credit info company in India is TransUnion CIBIL.

Q4. What is the new name of CIBIL?

A. The new name of CIBIL is TransUnion CIBIL Limited. 

Q5. What is TransUnion?

A. It is an American Multinational Group. TransUnion CIBIL is a part of this group.

Q6. How many credit information companies are there in India?

A. In India, there are a total of 4 credit info companies. They are (i) TransUnion CIBIL, (ii) Experian, (iii) Equifax and (iv) CRIF High Mark.

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