Are you planning to take a loan? Will you get the loan ?What factors determine if you will get it or not?

Can you improve your chances to get a loan before applying? Can you reapply if you were rejected in the past? These are the questions which we try to answer in this post.

What is Credit Score ?

A Credit Transunion score or credit score as it is commonly called is a metric. This is a metric or numerical score used by lending institutions to assess an applicant. The assessment is based on the past credit history and behaviour of the applicant.

A credit score is formulated and assigned by CIBIL (Credit Information Bureau of India Limited). CIBIL prepares a report called Credit Information Report or CIR when a lender checks your background information on getting a loan application.

What is a good credit score

Once you submit a loan application, the bank or financial entity submits a request to CIBIL. They mention your Birth Date, PAN(Permanent Account Number) and government photo identity in the request.

CIBIL is a repository or collection of all financial transactions done by an individual or organization. They have complete reports of financial data from various financial data.

Using the FICO metric as base calculation CIBIL arrives at a numerical  number. This numerical number is what is called as CIBIL Transunion score or Credit score. It is a number between 300-900.

If you have a very bad history your score will be near 300. Investors with a  high disciplined track record have a score above 800. Not seen anyone get a 900 so far. 🙂 So understood ‘What is credit score’?

How is credit score calculated ?

The credit score primarily depends on 5 factors which include :

Source:WellsFargo

1. The past payment history – Major factor
2. Your total outstanding credit to institutions
3. Length of credit history
4. New credit which you took recently
5. Type of credit mix (good loans and bad loans)

How/Where to get a credit score

1. Go to www.cibil.com . Click ‘BUY YOUR CREDIT SCORE’

2. Select CreditUnion Score. Enter your personal details, contact details, ID & address proof details.Click ‘Proceed for Online-payment’

3. You will be provided with a CIBIL Transaction ID. Save it. Select Payment method. Enter payment details and finish the process.

4. Take a print out of the form. Attach self attested copy of your ID/address proof which you selected in Step2.

5. Send it to CIBIL at below address

CREDIT INFORMATION BUREAU (INDIA) LIMITED
Hoechst House, 6th Floor,
193 Backbay Reclamation,
Nariman Point,
Mumbai 400 021
Tel : +91 – 22 (STD Code) – 6638 4600

If there are any clarification you will receive an email for clarification. Else, You will get your CIBIL report mailed to your address in 10 days.

What if you have never taken a loan ?

In some cases for first time credit seekers, the likely credit score is NA/NH. You don’t need to panic. This just means that CIBIL does not have any credit history established with them especially in last 24 months.

Very few banks turn away a credit proposal from worth customer  due to NA/NH score. This means even if one bank rejects your loan application, you can apply to another bank and it is likely to get approved.

NOTE: Most people avail an Education loan and default on their payments. Please keep in mind that this will have a negative influence on your credit profile.

The negative will remain even if the loan is waived off by the government.So it is better to start paying at least the interest on your education loan 6 months after graduation.

Hope this ‘What is credit score’ post was useful for you. Now share it with your friends because it will benefit them.

Let us know your thoughts below or how credit score has affected you.