Why your Cibil credit score matters?

Credit score, popularly known as CIBIL score, is an indicator of your creditworthiness. Credit score of an individual is a number that is arrived after studying factors such as borrower's loan repayment record, outstanding loans against his name, and nature of loans - secured or unsecured.  Credit score may range between 300 and 900, and a score above 750 is an indicator of a good credit profile.  Nowadays, banks use credit score to decide a person's loan eligibility.

A good credit score provides access to credit. However, if the credit score is poor, typically below 750, or credit report of the applicant of a loan has a mention of a default on loan in the past, banks may choose to reject an applicant's loan application. Use of credit score is not restricted to only loan approval process. Banks have been using credit score to lure right customers. 

Banks have shown willingness to offer marginally lower interest rates to a person with a good credit score. At 11% interest rate, for 20 years tenure for a loan amount of Rs 50 lakh, EMI works out to Rs 51,609, whereas if one gets the loan 50 basis points lower - at 10.5%, the EMI works out at Rs 49,919, monthly saving of Rs 1691.  A loan applicant with a good score can negotiate with the bank to reduce or waive other charges such as processing fee, prepayment fee. So, to put it simply, a good credit score puts a loan applicant in an advantages position. Individuals will be better off using credit responsibly. So, repay your loans on time, build your credit score and maintain your credit profile attractive. Because, in observing these factors, you will not only save money, but also enjoy peace of mind. 

Rajiv Raj

Rajiv is a credit expert with 10 years of experience in personal finance and consumer banking industry and another 7 years in credit bureau sector. Rajiv was instrumental in setting up India’s first credit bureau, Credit Information Bureau (India) Limited (CIBIL). He has also worked with Citibank, Canara Bank, HDFC Bank, IDBI Bank and Experian in various capacities.

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