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CIBIL Full Form - Credit Information Bureau (India) Limited
Credit Information Bureau
- CIBIL stands for Credit Information Bureau (India) Limited. It's the first credit information company in India established in August 2000.
- This company collects and maintains credit many individuals also as commercial entities.
- It deals with borrowing and payments related to loans and credit cards.
- CIBIL is also referred to as the credit bureau. It's licensed by the RBI and governed by the Credit Information Companies Regulation Act, 2005.
- It takes help of its associated partners like members of bank and credit institutions to collect this information.
- The associate partners provide information on a monthly basis. Based on this information, CIBIL creates a Credit Information Report (CIR) and CIBIL credit score of an individual. This report is shared with credit institutions to help them evaluate and approve loans.
- A CIBIL credit score may be a three-digit number that represents the summary of your entire credit history.
- It's prepared based on the information provided in your credit information report. This score generally ranges from 300 to 900.
- Thus, CIBIL plays an important role in India's financial system as it helps banks and other financial institutions manage their businesses and also helps customers secure credit on fair terms.
Why is CIBIL Credit Score important ?
- CIBIL plays a serious role within the approval of a loan. If you don't have a satisfactory CIBIL score, most of the banks might not consider you eligible for the loan.
- When you submit a loan application, the bank first checks your credit score and credit history.
- If you have an occasional credit score, the bank may conclude that you have a bad credit history and thus it may reject your loan application.
- On the contrary, if the credit score is good, the bank may easily approve your loan. So, the higher the score, the higher the chance that your loan are approved.
Benefits of a good CIBIL Score
Benefits of a Good Cibil Score
- Eligible for Loan : CIBIL score decides your eligibility for a loan. A good CIBIL score makes you eligible for getting a loan easily.
- Discount on interest rate : If you’re CIBIL score is high, you may negotiate for the better interest rate for the loan.
- Faster loan approval : Loan approval will be quick and easy. The banks or lenders may give you a pre-approved loan or a credit card without annual fees.
- Higher credit limit on credit cards : A good CIBIL score suggests that you are a responsible borrower and are making loan payments consistently. So, you'll get credit cards with higher credit limits easily.
- Loans with longer tenure : You'll request for a longer tenure for loan payment, e.g., a 7-year car loan or a 25 year home loan.
Significance of credit score
- CIBIL plays a big part in obtaining a loan. If individuals don’t have a CIBIL score that's acceptable, most banks won't find individuals worthy for the loan.
- When you apply for a loan, the bank reviews individual’s credit score & credit history first.
- If individuals have a low credit score, the bank will assume that you have a bad credit history, and will, therefore, refuse individuals apply for the loan.
- If the credit score is strong on the contrary, the bank will easily accept individual’s loan.
- The higher the score, the greater the chance of approving individuals loan.
- The CIBIL score determines your eligibility for loans. A good score on CIBIL makes individuals easily qualify for a loan.
Factors that will negatively affect your CIBIL score
- Making several credit inquiries at a similar time to multiple banks and other institutions.
- Irregular repayment behavior just in case of loans, utility bills, and emis.
- Turning a defaulter for not paying MasterCard bills/ making late payments or consistent part payments.
- Having a huge amount of unsecured credit like multiple personal loans.
- Getting rejections for multiple applications of unsecured loans.
- Turning a defaulter as a guarantor for your friends or members of the family