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What is cibil score? A civil score is simply a numerical term derived from a credit scoring model, to represent an individual’s creditworthiness. A credit rating is primarily calculated based on an individual’s credit report, details typically sourced from various credit agencies. However, the number given to an individual will depend on a variety of factors. Some of those factors include the amount of debt held by the individual, their past credit history and repayment habits, and the types of credit used.
So, what is this particular cibil score anyway? The actual name for this system is “the FICOquinine”, which is derived from “the FICO concept” – which is basically credit information modeling from actual credit reports, with the goal of helping individuals understand their chances of meeting financial goals, and what course of action to take in order to reach them. The “quinine” part of the name actually refers to the “fICO” formula, though it is typically abbreviated to “FICO”.
The “cibil” score then is a numeric representation of all of this information. The formula then is applied to every time a specific inquiry is made, and every time a new credit card is applied for. The formula then evaluates the number of inquiries, and credit cards or loans that are new or opened, and adjusts the score accordingly. When the numbers change, the adjustment is made, and that is what causes the “cibil score” to change each time a new record is added to the credit report. This score is essentially a floating-point, which can be altered at any given moment, by simply adding or taking away from the elements that are being evaluated.
It should be noted, however, that the civil score is not simply a measure of the credit card user’s ability to manage his or her credit cards. Rather, it is more of statistical measurement of that ability. By definition, a good score should have an acceptable level. But, on the other hand, the numbers themselves do not define good scorers – only the users of the scores can judge them. Therefore, although the name may indicate that a person has a good score, that person can be very well served by controlling the use of his or her credit cards, and also having a good debt to income ratio.
What is a civil score then, and how does it differ from the FICO score? Well, the FICO is used by most lenders, since it closely resembles a standard credit scoring model. If it is possible, then every time a lender checks your credit history, the lender will use the FICO model. A civil score, on the other hand, is a bit more complicated since it takes into account not only the credit-card history of the user but also the financial information of the user, which includes factors such as current employment and current income, as well as some other less important (but still relevant) factors.
The reason why it is more complicated to calculate a civil score than a FICO score is the sheer number of factors that go into the calculation of it. When you compare the FICO and CIBil, for example, it will be quite noticeable that there are many differentials involved in the calculations. A significant number of cases, actually. It is because of this that comparing credit reports of different individuals, even when both have the same credit report type, is usually considered to be somewhat difficult.
Read Also: How to improve your cibil score?
How is it possible to know what a lender may consider being a good score? You can find out by asking the lender regarding the frequency in which they check your credit reports, which you should do anyway. What happens is that the lender may check if you have paid your bills on time or not, and may also check your financial history (such as the sum of the debt and the interest paid). However, if you have been reported by a creditor as being delinquent on at least one of your credit cards, then the likelihood is that this is going to hurt your overall score.
What is cibil score? The answer to this question, obviously, is “not much”. But it does provide you with a guide, so to speak, as to how good or bad your financial discipline is. In case you have several credit card accounts in good standing and a couple of default accounts – say, about five years old each, with just a couple of late payments on them – then your chances of being reported to a credit card agency as having a low score are high. On the other hand, if you pay your bills on time and your financial discipline has been established, then you have a good chance of being reported as having a high or medium score, depending upon the type of credit card report you have compiled.