A decent CIBIL score is essential for getting a loan or other forms of credit. A poor score is usually the sole reason for which your credit application can get rejected. Banks and financial institutions equip CIBIL with credit details on loans as well as credit cards about everybody every month. This information is then used by the Credit Information Bureau to create CIR or Credit Information Report. This report contains a score (CIBIL score) that is given to the banks and financial lenders.
The CIBIL score, credit terms for each loan, repayment methods, and all relevant transactions are included in the report. Banks and financial lenders use this report to inspect your repayment history and thus appraise whether to grant you loan or not.
What we need to know about CIBIL:
Many do not know that a credit score of at least 750 is needed in order to be considered eligible for a credit card or loan from a financial institution. Every credit inquiry and application gets recorded by CIBIL and frequent applications end up lowering your credit score.
The principal factors that influence the credit score are timely repayments and defaults on payments. Defaults show that you are not able to pay off your present obligations and hence your credit score gets affected negatively.
It is important to have a credit mix, i.e. a combination of unsecured and secured loans, personal loans and credit cards, or home and auto loans. Repeated applications and attempts for loans also lower the credit score as the Credit Information Bureau gets the impression that you are hungry for credit.
It is advisable to have just one credit card and be extremely regular about making repayments. If your credit score is low, do not apply for a loan or credit card.