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What is the CIBIL score and why does it matter?

Haven’t we all heard from bank agents about how significant it is to maintain the CIBIL score? And them urging us to maintain a certain range of scores? But why does it matter and what exactly does it mean?

What is the CIBIL score?

CIBIL score is a three-digit number that represents an individual’s creditworthiness. The Credit Information Bureau India Limited (CIBIL) calculates the score, which is India’s first credit information company.

Scores range from 300 to 900, and a higher score indicates a better credit history and greater creditworthiness. The score is based on an individual’s credit history, including factors such as credit utilization, credit inquiries, payment history, and the length of credit history.

Why does CIBIL score matter?

CIBIL score determines an individual’s creditworthiness and lenders use it to make lending decisions. Higher the score, the less risky the borrower is and the more likely to repay the loan on time. Availing of banking loans, credit cards, and other financial products is easy when you have good creditworthiness.

On the other hand, a low score indicates a high credit risk, which can make it difficult for an individual to get approved for credit or may result in higher interest rates and unfavorable loan terms.

To maintain a good score, it’s important to pay your bills on time, keep your credit utilization low, and maintain a healthy mix of credit. You can also periodically check your score and credit report to make sure there are no errors or inaccuracies.

In summary, a good score is important for securing loans and credit cards with favorable terms. Maintaining a good credit history by paying bills on time and keeping credit utilization low can help improve your score over time.

Therefore, it is important for individuals to maintain a good CIBIL score by managing their credit responsibly and making timely payments.

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