The promulgation of the Credit Companies (Regulations) Act in the year 2005 has led to creation of 4 major credit rating agencies such as TransUnion CIBIL, Equifax, Experian and CRIF Highmark. These organisations are designed to evaluate an individual on the basis of their credit history and assign them a number based on their creditworthiness. This number, known as the credit score, plays a very crucial role in making any financial decisions, especially credit related.

While the credit score by all of these organisations are valid, the CIBIL score, calculated by TransUnion CIBIL is the most popular and widely accepted one.

A CIBIL score can essentially be understood as a 3 digit numeric representation of your creditworthiness, ranging from 300 to 900 (check your credit score here) Based upon individual credit history, a CIBIL score closer to 900 shows reliability as a borrower while the converse represents an individual to be not so credible a borrower. On average, a course over 600+ is considered a good score.

To know more about what your credit score says about you here, read here.

A credit score says a lot about an individual. Since the credit score of an individual is associated with his/her credit history, it is important to know the same before making any major financial decision, especially if it involves credit in any form. Plus, the RBI has issued guidelines to the effect that no loan or other forms of credit should be given without evaluation of the individual’s CIBIL score.

Some of the most important uses checking your CIBIL score are:

• Helps you get approval for loans from banks easier and faster.
• Helps in negotiating a better rate of interest and mode of repayment
• In case there is any discrepancy or error as to your financial history, you can approach the concerned authorities and get it rectified. For instance, you can check that only the hard enquiries that you have initiated are mentioned and none other.
• Helps you get a cheaper insurance premium from your insurers.
• In case of a low CIBIL score, you can make amends and start taking steps torepair your CIBIL score

CIBIL score is an essential metric as far as the creditworthiness of an individual is concerned. It is important to know your CIBIL score before taking up any major financial commitment. It is because of this reason that several portals offer a free credit score check. For instance, you can visit the EarlySalary website or app and check your CIBIL scorefor free.

The CIBIL score is not a static concept; it’s a dynamic one. While certain right steps and make your CIBIL score soar and make your life easier, a bad one can lead to a lot of troubles so far as the credit taking process is concerned. Some of the things that adversely affect your CIBIL score include:

• Excessive use of plastic money
• Delay in payment of EMIs
• Lots of hard enquiries for credit
• Taking up too many loans in a shorter span of time or High credit utilisation
• Default in repayment of loans or credit card bills
• Increased number of unsecured loans over secured loans

Since there are several factors that affect CIBIL score and owing to the importance of having a healthy CIBIL score, here are a few tips you can use to improve your CIBIL score:

• Excessive use of plastic money
• Delay in payment of EMIs
• Lots of hard enquiries for credit
• Taking up too many loans in a shorter span of time or High credit utilisation
• Default in repayment of loans or credit card bills
• Increased number of unsecured loans over secured loans

Borrowers can keep in their mind several tips and tricks to preserve their credit score or even improve their credit scores.Check here in detail.