How to interpret your CIBIL score?
by K Srinivas, CMA CS on 13 September 2011
After my previous article on CIBIL scores, http://www.caclubindia.com/articles/how-does-a-cibil-score-affect-you--11186.asp, many people have mailed me with queries on how to interpret CIBIL Scores.
We saw earlier that Lenders rely upon an individual credit report like CIBIL while assessing an individual's loan application. Let us now go through what each score implies and how the scores are viewed by the lenders before making the final decision.
An individual's credit score usually range from 300-900 -the higher the score, the higher the prospects of getting the loan sanctioned by the lenders. A lower score, on the other hand, may lessen the chances of getting the loan credited.
You may wonder why I have mentioned the term 'prospects' and 'chances' while discussing higher and lower cibil scores above. This is because a high score doesn't always mean that an individual will get a loan sanctioned and a low score doesn't mean that individual's loan application will be rejected.
Remember that a CIBIL score is just one of the many parameters and checks that a lender researches while assessing a loan application. The other parameters, for example, collateral security offered, also play an important role in helping the lender take a call.
Moreover, every lender makes a decision only on the basis
of standards fixed within the organization and a CIBIL score is analyzed on the basis of internal policies. Every lender may have a cut-off score for granting a loan. If the individual's credit score is below the cut-off, the loan application, in all probablity, is rejected.
0 or -1 score:
Individuals with a 0 or -1 score are exceptional, if not unusual.
An individual gets a 0 score if he has little credit history, usually less than 6 months. For example, a person who opened his first SB a/c in a bank during the last 3 months. If he applies for a credit score, he will get a 0 because there is too little information available to analyse his credit history.
A -1 score implies that the applicant has no credit history. This may be because there is no information about an individual's credit history provided to CIBIL by any lenders.
A 0 or -1 score doens't mean that a loan application will not be considered. It only means that the lender cannot use CIBIL score of the individual to make lending decisions. Hence, the lender will base his lending decisions on other parameters.
The author, CWA Srinivas K . is the Coach for CA/ICWA/ACS. firstname.lastname@example.org. www.fatmadesimple.wordpress.com
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