If you have freshly graduated college and started working, the words CIBIL or CIBIL score most likely don’t make much sense to you, given you don’t specialize in areas of economics. These terms, you will hear, either from your elders, on news channels or from someone at your office. And if you still do not know what do they mean, read on as we explain many aspects of CIBIL and Credit Information Report.
What Does CIBIL Do?
Before knowing the importance of CIBIL Score, you must understand what is CIBIL and what does it do. CIBIL stands for Credit Information Bureau (India) Limited and it is the first ever credit information bureau of the nation. It was established in the year 2000 with the aim to simplify and bring efficiency in the credit space. However, it is important to understand that CIBIL doesn’t make any decisions regarding lending, it is just responsible for keeping the records of credit-related information in its database.
What is Credit Report and CIBIL Score?
A credit report is a record of all credit-related information of an individual that establishes their creditworthiness. It includes all the details of credit that they have acquired till a given point of time. CIBIL collects and maintains records of these credit-related information of citizens, as reported by their lenders. These lenders can be banks, NBFCs, or credit card companies. This information includes the details of every loan one has taken and every credit card transaction they have made. It also shows how much credit an individual has taken and how much of it has been repaid. Those records also show if one has missed making any payments to a bank or credit card company etc. It contains your debt and repayment history along with all your relevant details.
A score is calculated based on your credit report and that score is known as your CIBIL Score. It is a 3-digit numeric expression determined by using intensive in-house algorithm calculations. CIBIL scores their ratings from 300-900, 300 being the lowest. CIBIL scores are calculated based on at least 6 months of financial data of an individual. The data is fed into an algorithm with 258 different variables; each with a different weightage and one’s score is calculated.
Significance of CIBIL Score
Once CIBIL calculates the credit score or CIBIL Score, the score is sent across banks and NBFCs for evaluation on their end. For these banks and NBFC’s, your CIBIL Score is your first impression. A good CIBIL Score means you have a score of at least 750. Many aspects related to your finances are influenced to a great degree by your CIBIL Score.
- Loan Approvals: Any bank’s decision to give or not give you a loan is determined by multiple factors, but first and foremost by your CIBIL Score. If your score is lower than 750, most banks will not consider you eligible for a loan approval. Therefore, it is crucial to build and maintain a good CIBIL Score.
- Interest Rate Negotiation: An individual with a robust CIBIL Score is favored by banks and NBFC because their creditworthiness is higher. And a good CIBIL Score will also fetch you lower interest rates, along with getting your loan approved.
- Other Benefits: Having a good CIBIL Score can also help you avail other financial benefits, such as lesser insurance premium and higher loan amounts.
What to Do If You Need a Loan but have Low CIBIL Score?
If you are in need of a small and instant loan but your CIBIL Score isn’t leaving a scope for getting it in the traditional way, FlexSalary has you covered. We will give you a loan against your salary in the form of an open-ended line of credit. You can simply think of it as an early salary or salary in advance, in your time of need.
This product is provided exclusively to salaried employees. Any individual who works for a salary can face a monetary challenge in the face of unanticipated events. At that point, it is natural to feel the need for your salary in advance, and that’s exactly what FlexSalary offers. With FlexSalary’s salary in advance you can get your early salary up to 2 Lakhs. Find more information on this here.