Cibil Score, An important process one should know if he/she is applying for any type of credit card, loans, EMI etc. Any loan providers will definitely check your cibil Score and then will pass your loan. So What is Cibil score, How it’s important for a every citizen of India ? , How does this affect our life if we violate it’s terms and condition and many things.
So Today I would like to Share you all the basic info on process of Cibil Score and It’s Importance Stay tuned…
Reading the below blog on Cibil Score is vast, So I’ve divided this into parts with an example which would help you to Understand more easily, So Let’s get started !!!
- What is Cibil Score
- Where to check Cibil score
- Process of Cibil Score
- How a Cibil Score affect us
- How Cibil Score works
- Scams on Cibil Score
- How to improve cibil score
This 5 points will help you to understand how this process works, what are advantages and disadvantages of it and how beneficial is this in our future.
I would try to explain whole concept in my own words, further for more info you can search for google.
What is Cibil Score.
In a simple words I can say that Cibil Score is a type of grade which helps us to get all types of suitable loans provided from the bank. Not only loans, credit cards EMI all the things depends upon your Credit Score.
No matter how much do you earn, but if you’ve a poor Cibil Score you can’t apply for any type of loans.
Now as the word poor is already refereed let me tell you. Credit has two types a good and a bad.
The Score is in range for around 300 to 900 points. For getting a loan approved we need at least 650 points and above.
In India Cibil handles all the process of Cibil Score
You might be thinking how these points are generated, That’s where you need to understand the process of Cibil Score.
Where to check Cibil Score: https://www.cibil.com/freecibilscore – Choose a plan for signing up – and check your current Cibil Score
Process of Cibil Score
As mentioned above the process totally works on point system. Now how this points are generated, Let’s check below with an example .
Suppose you order a mobile and choose to pay via EMI (Easy Monthly Installments) example bajaj finserv.
After the phone arrives your EMI gets debited from you account monthly. But in case if you forgot to pay EMI or due to any personal issue, for around 2 months or more. You’ll get a call and will be ask to pay the whole amount with penalty fee. As if you ignore more the penalty fee will be increased. Afterwards even if you still don’t pay the amount you’ll be in default category.
There are two main subcategory of defaulters
- Written Off
- Settled Off
- Written Off : This means that you’ve forgotten to pay the EMI and then you pay the whole amount after minimum duration, so you’re profile will be marked in Written off
- Settled Off: This means that you don’t want to pay the rest of the EMI, So here you’re profile will be marked as Settle OFF.
AS, I mentioned above that some this has advantages and disadvantages so let’s check How does Cibil Score affect us in this two periods
What are the things that affect on our Cibil Score
AS this whole process is related to bank, loan, EMI, we must remember one thing every time a major document of ours is required for all the process mentioned. In this case it’s pan card.
Pan Card is a most important document in all bank related activities, So as our Pan Card is linked to all the accounts. By entering your pan details a government authority can access all your transactions, your current EMI’s, loans everything.
So When a authority comes to know about your pending EMI’s or missed due dates to pay loan. He/she declare your points according to your transactions. If you pay your loans, EMI time to time your Cibil Score is always above 700 points, and if you fail to pay your EMI on time your score decreases.
Here are the things which will have a negative impact on Cibil Score said by PaisaBaazar
- Credit repayment history
- Credit utilization limit
- Multiple loan application
- Loan servicing term
- High percentage of unsecured loans
- Increase in credit limit
- Not checking your credit report for mistakes
- Giving guarantee for loan
You can read whole definition here
Now Let me explain you How to Cibil Score works and the two sub categories in brief:
How does Cibil Score works here
Normally Whenever a fresher pays his first EMI, The EMI provider generates a report monthly and submit it to Cibil, Then the Cibil provides us a score according to it. Now Here Cibil considers everything like a missed payment of credit card bill, bounced cheque and much more.
So by re verifying all the details the Cibil Authorities gives us a Cibil Score, A normal Cibil Score with time payments will always be approx 450 to 500, then time by time if you pay all the things on time your score increases. But in case if you miss to pay a EMI after several warnings, from the service provider. He/she will again send a new report in next month.
Here’s a major thing: Once the Cibil authorities find they you’re not paying the amount on time, you’re score will automatically decrease to minimum.
Here sub categories plays an important role, Let’s learn them briefly
1st part :
Written Off: Let’s assume that you’ve missed an EMI from past two months, and you think to pay the whole payment with penalty fees after 2 months of missed payment.
So Once the payment is cleared, you’re score will be on minimum till 4 months, (divide your delay time * 2), In easy way your score card will be in red, Now to change the score from red to green. Once the 4 months cycle is completed and you start paying things on time you’re whole score will be back to normal.
This is for normal loan, sometimes even it could take at least 12-24 months of time to reflect your Cibil Score for big loans. Till the score is not upgraded you cannot apply for any other loans
Mostly the payment window is active till 180 days from due date
This is How Written Off works.
2nd part :
- Settled Off : In easy way, if a company thinks that a user is not going to pay the rest of the amount, he marks the user in settle off. Now you need to remember this thing, Once your id or we may call your pan card is marked in Settle Off, Trust me in your whole life you cannot apply for any type of Loans. Any lender would first see your records and if it’s already marked settled he won’t provide you the loan with any risk, So Strictly avoid it.
The Bank says that no matter what your condition is, never opt for Settle off. You can do many things, if you’re not able to pay loan or EMI on time, take help from someone, extend your payment date by requesting bank, sell some valuable asset and pay the loan. In most genuine cases banks do understand and provide more time to repay your amount, but if situation is out of hands, you need to go for settled off.
How Do Scammer trick you for increasing Cibil Score
As i already mentioned that there can be a waiting window for about 12-24 months to get the score reflect in your account, till then you cannot apply for any other loan. So what scammers do here, They’ ll call you and will try to convince you that they can solve your settle off, as well as to skip the waiting time . But that’s all wrong, Whenever you find a company who guarantees that he/she will increase your score, or remove your status from settle off, read its companies policy and terms and conditions you’ll get to know all the details.
In terms and conditions they will say, we’ll try to get you out of this. For whole thing, they will ask you for a fee per month and will convince you that your score will reflect, but that’s all false.
The Cibil Score will change when the waiting time is completed, no other authorities can help you in this matter.
Maybe they could help us from small transactions amount till 10K but if you’re amount is more than that, make sure you’re carefully reading terms and conditions of the company who is solving all the problems.
# I have a brother who paid fees for some months and nothing happened, after words he clarified everything with Cibil customer services, and they said everything will automatically update once the waiting time is completed.
So beware from this type of SCAM…!
How to improve Cibil Score
Easiest way to improve Cibil Score is to pay all the fines, EMI, Loans on time. Follow the rules of Bank for minimum Deposit or withdrawal, Even if you have missed any payment, connect to the management and make sure you give a valid reason. Maybe they can help you..
Also if you pay everything on time, you’ll be rewarded with good Cibil Score.
Getting a loan, or paying bills through EMI is OK, As sometimes you can’t manage to go for a full payment, but at least make sure that you’re paying all the things on time, If not at least pay all the bill a month late, Bank trust us by checking our previous records and then provides the loan. So it’s our right to pay the same money with interest on time. No matter what if you always pay your loan on time, You’re score will be always about 700, A score about 700 or more ensures that the user is trusted. You won’t face any problems for getting a loan at the time of emergency.
So That’s it these are all things you should know about Cibil Score and it’s whole process.
Note: The whole blog is written on my experience, if you found anything wrong or irrelevant you can comment below.
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