What Is CIBIL Score and Why It Matters?

Posted on Thursday, February 20th, 2025 | By IndusInd Bank

When you are facing a cash crunch, applying for a personal loan can be the right solution. During the application process, the bank will consider your CIBIL score. This score can impact your chances of securing a loan to a great extent.

So, what is the CIBIL score? CIBIL is India’s leading credit bureau that evaluates your credit history to generate a three-digit score that can range between 300 and 900. The higher the score, the better your chances of securing credit at favourable terms.

Understanding CIBIL Scores

First, let’s get to know the full form of CIBIL.

The CIBIL full form is Credit Information Bureau (India) Limited. It is India’s first credit bureau and provides credit scores and credit reports based on your financial behaviour. The bureau is licensed by the Reserve Bank of India to collect and maintain records related to individuals’ and companies’ credit behaviour. Based on this data, the bureau develops a credit report with a credit score. 

A CIBIL score ranges from 300 to 900. The bureau calculates your score based on your credit repayment history, unpaid debt, credit inquiries, and overall financial discipline. 

Generally, a score of around 730 is considered a good credit score. If your score ranges between 750-900, banks will consider you as a highly creditworthy individual. The higher your score, the better your chances of getting a good interest rate on your personal loan. 

Why is the CIBIL Score Important for Securing a Loan?

A good CIBIL score is essential when applying for a personal loan for the following reasons:  

1. Loan Approval

Banks will look at your CIBIL score to determine your creditworthiness. A high score (750+) increases the likelihood of loan approval.  

2. Interest Rates

Borrowers with excellent scores enjoy lower interest rates. However, a low score may pose the applicant as risky, and the bank may charge heavy interest rates. 

3. Loan Tenure and other Terms

A good CIBIL score means you get better flexibility in choosing loan tenure and repayment terms.  

With better loan terms, you will have an easier time paying your EMIs. To make the process even easier, you can use a personal loan EMI calculator, since it gives you an estimate of the EMIs even before you apply. 

Factors that Affect Your CIBIL Score and How to Ensure a High Score

Here’s a breakdown of the factors that affect your credit score and how you can maintain a high score:  

1. Payment History 

Your past payment records have a major impact on your CIBIL score. Missing loan EMIs or credit card payments can lower your score.  

Make it a habit to pay your EMIs and credit card dues on time. Set up standing instructions with your bank to never miss a due date.  

 2. High Credit Utilisation

Credit utilisation ratio refers to the credit you are using as compared to the total credit you have. One should keep their credit utilisation below 30%. For instance, if your credit limit is ₹1,00,000, avoid using more than ₹30,000. Requesting an increase in your credit limit may also improve the ratio.  

3. Credit Mix

A balanced mix of secured (home or car loans) and unsecured credit (personal loans or credit cards) can have positive impacts on your score.  

Hence, try to diversify your credit portfolio. Avoid relying only on unsecured loans. Managing different credit types shows you have financial responsibility.  

4. Multiple Enquiries

Too many loan or credit card applications within a short period reflect financial stress and lower your score.  

Hence, you must avoid frequent credit applications. Use pre-approved loan offers and check eligibility criteria before applying to minimise hard inquiries.  

Also Read: Essential Criteria for Qualifying for a Personal Loan

Conclusion

Your CIBIL score is an important aspect to consider when you want to secure favourable loan opportunities. Before you apply for a personal loan, you must learn about the full form and meaning of the CIBIL score in banking and implement the right strategies to ensure a high score. Personal loans can be of great help in many situations, whether it is to renovate your home, pay medical bills, or take care of emergencies. However, it is important to use the personal loan wisely and responsibly. 

With IndusInd Bank, you can apply for a Personal Loan in a few steps and enjoy instant approvals and disbursals. Make the most with our competitive interest rates, flexible loan tenures, no collateral requirements, flexible repayment options, and more.

Make your personal loan journey smoother with IndusInd Bank’s Personal Loans.

Apply now! 

Disclaimer: The information provided in this article is generic and for informational purposes only. It is not a substitute for specific advice in your circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any financial decisions based on the contents and information.