A credit card is one of the easiest methods of utilizing instant financing. Almost every bank in India provides their customers with a credit card facility. However, since it is a form of financing service, there is a certain background check required. This background check allows financial institutions to understand your repaying capacity.
The most crucial part of a background check is related to credit or CIBIL score. This rating determines whether the customer has enough resources to repay his debt or not. Although, every financial institution has its own mechanism of calculating the CIBIL score, certain benchmarks determine what is a good CIBIL score.
What is a Good Cibil Score?
The CIBIL score is calculated on a scale of 300 to 900. The higher your score is, the more chances are of you getting a credit card. For example, if your rating is near the score of 800, then any financial institution in India will be willing to give you credit.
On the other hand, the score which ranks close to the bottom limit is considered bad. So, if you have a CIBIL score of 400, then there are fewer chances of you getting financial assistance. There are some banks and financing firms that give credit to borrowers with a low CIBIL score but at a higher interest rate.
On an average, an ideal CIBIL score is around 750. If you are wondering what is a good credit score, then this is the rating that you should target. This will allow you to apply for financing in various institutes without any problem.
What are the advantages of an ideal CIBIL score?
While you are trying to learn about credit score, you should also understand its importance. Since CIBIL score is related to the background check of borrowers, it can facilitate many things. Here are a few examples of how maintaining a good CIBIL score can help you.
- You can get credit facility without much hassle.
- Borrowers will have a wide range of financial institutions to choose from with the help of a good CIBIL score.
- Having a good CIBIL score gives you a chance to create a balance between secured and unsecured loans.
- Since CIBIL score represents your repaying capacity, you might get a higher amount of credit easily.
- A good CIBIL score works towards acquiring every type of financial service. The list may include credit cards, personal loan, business loan and more.
How is CIBIL Score Calculated?
There are many factors which are responsible for calculating what is a good CIBIL score. Each organization gives importance to one or other factor. In most cases, 40% of the CIBIL score calculation depends on the credit repayment history of the borrower.
This means if you have taken a loan in the past, then your instalment paying history from that time will be taken into consideration. Below you will be able to find a few more elements, which are often used while calculating a credit score.
- The amount of credit balance available
- The number of pre-existing credit cards and loans
- The amount of credit already utilized by you
- Credit reports generated by other lenders on your account
- The level of balance between unsecured and secured loans that you may have borrowed