What is CIBIL?
CIBIL is a Credit Bureau that is applied and available in many countries to analyse and appraise the financial stability of each person, especially based on credit cards, loans, or other transactions that are undertaken by them through banks. CIBIL stands for Credit Information Bureau India Limited. The credit score is the 3-digit score determined by the credit rating agency which ranges from 300 to 900. With a 700 plus credit score, it becomes easier to get a business loan.
A CIBIL report displays the following information about an individual:
- Personal details of an applicant Name, DOB, Gender and KYC, Contact information. Mobile Number, Address
- Details of lenders who have made a formal inquiry about the status of the person as a credit score holder
- Any defaults on loans
- Any settled loans
- Employment history and income details including information about the employment like monthly or annual income details reported by banks etc.
- Any default in credit card payment
- All previous loans and their details
- Financial account information of the person like types and number of accounts
- Details of credit facilities, current balance, etc.
- All kinds of payments that the applicant has made for the last 3 years.
- Total credit limit available and monthly amount spent
- Any kind of inquiry that has been conducted by other banks or financial institutions
- The number of times your credit report has been accessed by banks/financial institutions
Reasons for creating a good CIBIL score for a business loan
There are so many reasons why a good CIBIL score for a business loan is going to create security and help in times of any stressed finances. It is highly recommended for everyone to take loans and repay these business loans on time so that credit trust can be created and maintained. It gives an extra time of funds holding, till payment if nothing else. Listed below are some other reasons why maintaining a CIBIL score is important.
- Gives access to the best credit cards in the market, as per the consumption of the person. Such as those that are heavy on petrol, or on online shopping, or those that are best for bill payments, dining, or flight tickets.
- Authenticity for a lower rate of interest – If you or your business has a good credit score, you will get a lower rate of interest on a loan. Even a small fluctuation can cause many changes in the credit score.
- Increases eligibility for taking loans
- To build a credit history – A good credit history is a mark of good financial understanding and builds trust in the market.
How to check the score
You can follow these steps through www.cibil.com to check CIBIL score to get the relevant details:
- Open cibil.com on a web browser
- Click on check CIBIL score
- Enter the details that are asked including attachment of proof scans such as PAN card scan.
- The score will be emailed to you free of cost.
- Until a time before, there were charges of Rs 500 for checking this score. Now it has been removed.
Factors that affect the CIBIL score for a business loan
A lot of factors affect the score like missing due dates, utilization of, request for an increase of credit limit frequently, etc. If we raise the credit limit frequently, the institutions or banks take that as a sign of negativity. Let us go through the main factors that affect the CIBIL score of a person or firm:
- Repayment History – How an individual or a firm manages its debts and liabilities is a matter of huge concern and directly impacts the CIBIL score especially in case of other payments like other loans, EMIs, etc.
- Application of other credit cards or loans – the number of inquiries or applications made to get new loans or credit cards also impacts the CIBIL negatively.
- Maintain a balance in credit – One must maintain a balance in applying for unsecured and secured loans.
- CUR or Credit Utilization Ratio – This is an imperative proportion that shows how much credit has been utilized as compared to the total credit available. The higher the CUR score, the more negative will be the applicant’s CIBIL score.
- Increase in the credit card limit – This may not be known to many people, but the number of times, a person request to increase the limit, affects the CIBIL as it increases the hard inquiry limits. This clearly shows the dependability of the person’s credit and how the available limit is not enough for him.
- Lack of credit history – Having no credit history is also not a good sign which shows the lack of involvement of a person in the financial market. It makes it difficult for the lender to diagnose the credibility of the persona and how good or bad he is with his repayment structure.
- Becoming a guarantor for the wrong person – Even if the individual has participated as a guarantor for a person who is a defaulter, it will adversely affect the CIBIL as the inconsistency is reflected on the goodwill of the guarantor also.
- Errors in the credit report and financial information – Any error or mistake on behalf of the bank or financial institution may adversely affect the CIBIL score, so you must check the payment and banking details thoroughly.
Credit cards and business loans are essential modern tools of quick trades and timely funding in case of reasons where debiting accounts is not sufficient. Thus, to ensure a good CIBIL score and to make a worthy credit report, it helps in the safety of an emergency where things could go wrong. Alternatively, if a bad score exists, not raising credit limits, not checking the score frequently and paying the debt off as soon as possible, and following all procedures and practices promised to the banks and institutions is necessary.