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Beverly Noronha
Oct 10, 2022

When you apply for a loan, the lender will first check your credit score. Higher credit scores can increase your chances of getting loans and reduce interest rates on personal loans. Learn about the different factors that affect your credit score and how a CIBIL score is calculated.

A good credit score can give you leverage while applying for a loan and add to your creditworthiness. Start working on your CIBIL score by first understanding what it means.

What is Credit Score and Why is it Important

A credit score is a three-digit record of a borrower’s repayment of debts. The Credit Information Bureau (India) Limited (CIBIL) is the most popular of the four credit information companies licensed by the Reserve Bank of India (RBI). They are - Equifax, Experian, High Mark, and TransUnion.

CIBIL India is part of an American multinational group called TransUnion which is why credit scores in India are called CIBIL TransUnion scores. You might be wondering what an ideal credit score looks like.

What is TransUnion’s Ideal CIBIL Score for Consumers?

As explained earlier, a credit score is a number assigned based on a borrower’s credit history. Credit history is collected from sources such as banks, credit card companies, and collection agencies.

A consumer CIBIL score is reflected in the ‘Accounts’ and ‘Enquiries’ sections of the Credit Information Report (CIR). Credit scores range from 300-900. Consumer CIBIL scores above 700 are considered good or ideal. A score between 550-700 means that you might have a few irregularities in past payments.

A CIBIL score out of 900 helps loan providers know which applicants are most and least likely to honour their loan obligations. Each bank has a credit scoring cut-off. Individuals who manage their loan obligations well build a ‘reputational collateral’ with lenders, allowing them to negotiate better terms.

Now that you know what CIBIL score to aim for, here are some factors that can affect your credit score.

Factors That Impact Your CIBIL TransUnion Score

A good credit score can lead to better interest rates on loans and faster approvals. It’s important to keep your CIBIL score healthy, so keep track of these factors that can impact your credit score:

1. Payment History

When you pay your loan or credit card Equated Monthly Instalments (EMI) on time, it boosts your consumer CIBIL score. A delay in payment or missed payments can cause your score to dip which is why repayment history counts for 35% of your credit score. Studies have revealed a 30-day payment delay can reduce your credit score by 100 points.

Make things easier by registering for eNACH. Also called the electronic National Automated Clearing House, it helps you automate recurring payments such as EMIs. Registering is simple and takes only a few hours.

2. Credit Exposure

Credit exposure or the Credit Utilisation Ratio (CUR) is the amount of credit you use in proportion to the available credit limit on your credit cards. Let’s say that you have a credit limit of ₹50,000 on your card. If you use ₹10,000, it makes up 20% of your total available credit. 

An ideal credit utilisation ratio is 30% of your total credit card limit. Higher credit exposure might signal that you are struggling financially or at risk of being a loan defaulter. This factor counts for 30% of your CIBIL score.

3. Credit History 

Your credit history begins when you open your first line of credit. A long credit duration suggests that you have experience in handling credit which comes in handy when you want to take out larger loans for houses, cars, and other big purchases. 

This means, if you are paying things promptly, over long durations, you are more likely to pay in the future. Lenders factor this in to give you better interests and lower EMIs in the future. Credit history counts for 15% of your total credit score.

4. Credit Type

There are two types of loans - secured and unsecured loans. Secured loans (home/vehicle) require you to offer something of value as collateral if you can't pay back your loan, whereas unsecured loans (credit cards) allow you to borrow the money outright. Multiple unsecured loans can negatively impact your consumer CIBIL score if there are payment delays or missed payments. The type of credit counts for 10% of your total CIBIL score.

5. Other Factors

Your remaining credit score is based on other factors such as hard inquiries. A hard inquiry is when a lender checks your credit report as part of the loan application process. If you have applied for loans in quick succession, frequent hard inquiries can damage your credit score. 

Now that we have dived into the factors that affect your CIBIL score, let's also learn how to calculate it.

How is Credit Score Calculated

There are two simple ways that you can calculate your CIBIL score:

1. A Free Credit Score Check Online

  • Log onto the official CIBIL website
  • Fill out the important details and choose your identity proof
  • After filling in the details, click on ‘Accept and Continue’
  • You will receive an OTP on your number
  • After you input the OTP click on ‘Go to Dashboard’
  • You will be able to check your credit score

2. PAN Credit Score

  • Log onto the official CIBIL website and choose Income Tax ID Number (PAN) and your identity proof
  • Fill out the important details and click on ‘Accept and Continue’
  • You will be able to check your online credit score

Now that you have learnt how to check and maintain a healthy CIBIL score, it will make the loan application process smoother. Here is a student-friendly option for study loans.

Learn About Collateral-Free Loans from Propelld

There are alternatives to traditional bank loans, such as private study loans offered by Propelld. While banks consider credit scores, Propelld believes that education should be accessible to all and goes beyond traditional credit scores. 

Loans are an investment in the future of our country, and a student’s potential should also be factored in. The organisation takes the time to understand the motivation behind education loans or loans for upskilling. 

Banks demand tangible collateral security and may reject loan applications due to the student’s CIBIL score or financial documents. Propelld has a unique approval process that takes into account a student’s academic merit and future ability to learn. It provides study loans for education across the student’s lifetime - for school, coaching, college, post-graduation, and even upskilling.

Benefits of Propelld Loans for Students

  • 100% digitised loan application process
  • Loans are sanctioned quickly
  • Customised loans based on the student’s profile
  • No-cost EMIs 
  • Propelld loans cover the cost of tuition fees, labs costs, library fees, etc

A poor CIBIL score can impact your future financial journey, so choose your loan partner wisely. Propelld removes the barrier to financial access with student-friendly loans.

Take a look at some of the most common credit score questions and clear your doubts.

What’s a Credit Score Anyway? Here’s Why It's Important and How You Can Calculate It

Beverly Noronha
October 10, 2022
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Shivam Bhardwaj
March 15th 2022

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A good credit score can give you leverage while applying for a loan and add to your creditworthiness. Start working on your CIBIL score by first understanding what it means.

What is Credit Score and Why is it Important

A credit score is a three-digit record of a borrower’s repayment of debts. The Credit Information Bureau (India) Limited (CIBIL) is the most popular of the four credit information companies licensed by the Reserve Bank of India (RBI). They are - Equifax, Experian, High Mark, and TransUnion.

CIBIL India is part of an American multinational group called TransUnion which is why credit scores in India are called CIBIL TransUnion scores. You might be wondering what an ideal credit score looks like.

What is TransUnion’s Ideal CIBIL Score for Consumers?

As explained earlier, a credit score is a number assigned based on a borrower’s credit history. Credit history is collected from sources such as banks, credit card companies, and collection agencies.

A consumer CIBIL score is reflected in the ‘Accounts’ and ‘Enquiries’ sections of the Credit Information Report (CIR). Credit scores range from 300-900. Consumer CIBIL scores above 700 are considered good or ideal. A score between 550-700 means that you might have a few irregularities in past payments.

A CIBIL score out of 900 helps loan providers know which applicants are most and least likely to honour their loan obligations. Each bank has a credit scoring cut-off. Individuals who manage their loan obligations well build a ‘reputational collateral’ with lenders, allowing them to negotiate better terms.

Now that you know what CIBIL score to aim for, here are some factors that can affect your credit score.

Factors That Impact Your CIBIL TransUnion Score

A good credit score can lead to better interest rates on loans and faster approvals. It’s important to keep your CIBIL score healthy, so keep track of these factors that can impact your credit score:

1. Payment History

When you pay your loan or credit card Equated Monthly Instalments (EMI) on time, it boosts your consumer CIBIL score. A delay in payment or missed payments can cause your score to dip which is why repayment history counts for 35% of your credit score. Studies have revealed a 30-day payment delay can reduce your credit score by 100 points.

Make things easier by registering for eNACH. Also called the electronic National Automated Clearing House, it helps you automate recurring payments such as EMIs. Registering is simple and takes only a few hours.

2. Credit Exposure

Credit exposure or the Credit Utilisation Ratio (CUR) is the amount of credit you use in proportion to the available credit limit on your credit cards. Let’s say that you have a credit limit of ₹50,000 on your card. If you use ₹10,000, it makes up 20% of your total available credit. 

An ideal credit utilisation ratio is 30% of your total credit card limit. Higher credit exposure might signal that you are struggling financially or at risk of being a loan defaulter. This factor counts for 30% of your CIBIL score.

3. Credit History 

Your credit history begins when you open your first line of credit. A long credit duration suggests that you have experience in handling credit which comes in handy when you want to take out larger loans for houses, cars, and other big purchases. 

This means, if you are paying things promptly, over long durations, you are more likely to pay in the future. Lenders factor this in to give you better interests and lower EMIs in the future. Credit history counts for 15% of your total credit score.

4. Credit Type

There are two types of loans - secured and unsecured loans. Secured loans (home/vehicle) require you to offer something of value as collateral if you can't pay back your loan, whereas unsecured loans (credit cards) allow you to borrow the money outright. Multiple unsecured loans can negatively impact your consumer CIBIL score if there are payment delays or missed payments. The type of credit counts for 10% of your total CIBIL score.

5. Other Factors

Your remaining credit score is based on other factors such as hard inquiries. A hard inquiry is when a lender checks your credit report as part of the loan application process. If you have applied for loans in quick succession, frequent hard inquiries can damage your credit score. 

Now that we have dived into the factors that affect your CIBIL score, let's also learn how to calculate it.

How is Credit Score Calculated

There are two simple ways that you can calculate your CIBIL score:

1. A Free Credit Score Check Online

  • Log onto the official CIBIL website
  • Fill out the important details and choose your identity proof
  • After filling in the details, click on ‘Accept and Continue’
  • You will receive an OTP on your number
  • After you input the OTP click on ‘Go to Dashboard’
  • You will be able to check your credit score

2. PAN Credit Score

  • Log onto the official CIBIL website and choose Income Tax ID Number (PAN) and your identity proof
  • Fill out the important details and click on ‘Accept and Continue’
  • You will be able to check your online credit score

Now that you have learnt how to check and maintain a healthy CIBIL score, it will make the loan application process smoother. Here is a student-friendly option for study loans.

Learn About Collateral-Free Loans from Propelld

There are alternatives to traditional bank loans, such as private study loans offered by Propelld. While banks consider credit scores, Propelld believes that education should be accessible to all and goes beyond traditional credit scores. 

Loans are an investment in the future of our country, and a student’s potential should also be factored in. The organisation takes the time to understand the motivation behind education loans or loans for upskilling. 

Banks demand tangible collateral security and may reject loan applications due to the student’s CIBIL score or financial documents. Propelld has a unique approval process that takes into account a student’s academic merit and future ability to learn. It provides study loans for education across the student’s lifetime - for school, coaching, college, post-graduation, and even upskilling.

Benefits of Propelld Loans for Students

  • 100% digitised loan application process
  • Loans are sanctioned quickly
  • Customised loans based on the student’s profile
  • No-cost EMIs 
  • Propelld loans cover the cost of tuition fees, labs costs, library fees, etc

A poor CIBIL score can impact your future financial journey, so choose your loan partner wisely. Propelld removes the barrier to financial access with student-friendly loans.

Take a look at some of the most common credit score questions and clear your doubts.

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Frequently Asked Questions

How to get a CIBIL score corrected?

When a person checks their CIBIL score, the Credit Information Report (CIR) can have mistakes. Here’s what you can do to correct your CIBIL score calculation:

  • Cross-check your CIBIL report with the status of your credit account
  • Report the problems to CIBIL by following the steps mentioned 
  • After creating the report you will be contacted within 30 days for verification and assessment by the CIBIL authorities

How to do a credit score check online?

You can do a credit score check for free online by logging onto the CIBIL TransUnion website. Fill in the relevant details, and verify your identity.

How do I check my credit score with a PAN card?

Once you log onto the CIBIL TransUnion website you can check your credit score by choosing Income Tax ID Number (PAN), and verifying your identity.

How do I improve my credit score? 

Payment delays can lead to penalties or a dip in credit score. A low credit score can affect your education loan interest rates and access to credit cards. You can rectify this by:

  • Making timely payments
  • Keeping your Credit Utilisation Ratio (CUR) below 30%
  • Making sure there is no outstanding balance on old credit cards
  • Avoiding taking too much debt at one time

Does credit score and CIBIL score mean the same thing?

The Credit Information Bureau (India) Limited was the first credit bureau in the country. That is why credit score and CIBIL score are used synonymously.

Will a loan rejection from Propelld affect my CIBIL score?

A loan rejection does not affect credit score. However, creditors may review the credit report when you apply which results in a hard inquiry. This can hurt your consumer score a little.

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