No CIBIL Score? Why Do You Need It, and How To Build It?

CIBIL score is considered an important factor for availing a loan. Read to know in detail about what is CIBIL score and why you need it and how to build it.

1 Dec,2022 10:45 IST 18 Views
No CIBIL Score? Why Do You Need It, and How To Build It?

In particular cases, financial institutions request a guarantor before applying for a new loan. Often, they prescribe such a criterion due to a low credit score. CIBIL scores play an inevitable role during loan sanctioning. It ensures your credibility as a genuine customer.

A good CIBIL score proves your creditworthiness to the financial lender. It is easy to secure low-interest loans from any institution with these parameters. Here’s everything you need to know about CIBIL scores, why you need them, and how to build an impressive score quickly.

What Are CIBIL Scores?

The Reserve Bank of India allows four institutions to provide credit ratings to individuals based on their lending behaviour, repayment patterns, and other lending dynamics. The credit ratings released by the Credit Information Bureau (India) Limited are called CIBIL scores.

CIBIL score represents a 3-digit code that measures your financial credibility. These scores fall in the range of 300 to 900. Where a score of 300 presents you as a high-risk customer with poor credit patterns, a score of 900 makes you a priority customer.

What Happens When You Do Not Have A Credit History?

Financial institutions are responsible for informing credit agencies about loan applicants. They share the data related to borrowers’ repayment schedules, defaults, and advance payments with the credit rating entities. Based on the record available, the agencies create a credit report assigning credit scores to every person who has availed of a loan.

However, sometimes, you might come across people with no credit history. In such cases, the credit report comes with words like NA or NH. As a result, it becomes challenging for lenders to assess their credibility.

Steps To Build Your Credit Score From Scratch

1. Apply For Credit Cards

Getting credit cards can be your first viable step towards creating footprints as a borrower before building a credit history. You can use your credit cards for many transactions and repay the bill on or before the due date to add plus points to your credit history. The bank will share this information with the credit rating agencies, who will calculate your credit score based on this data.

2. Take Secured Loans

Financial requirements can arise anytime and affect your plans. Loans are feasible options for such unplanned expenses. However, securing a loan without a credit score is challenging, especially an unsecured one. However, secured loans such as gold loans are easy to obtain even when you do not have a credit report in your favour as you deposit your gold assets as collateral. Moreover, these lending arrangements carry low-interest and flexible repayment tenure.

3. Opt For EMI Purchases

You can purchase consumer goods like TV, laptop, smartphones, etc., on EMIs using debit cards to build a credit history. For this, you can opt for online or in-shop purchasing. Ensure timely EMI payments and build a reliable repayment history and an impressive credit score.

4. Preach Good Financial Policies

• Ensure regularity in the repayment of a loan
• Maintain a balance between secured and unsecured lending products
• Keep your credit utilisation and the debt-to-income ratio low

The CIBIL score is one of the most crucial prerequisites determining your loan approval procedures eligibility. With a few exceptions, like gold loans, lenders usually prefer sanction loans to customers with an impressive CIBIL rating. However, you will likely not have a credit history if you are in the early stages of your professional life. You can use the tips mentioned here to build a credit history from scratch or enhance your credit viability for lenders.


Q1. What factors affect your credit scores?
Ans. Three primary factors affect your credit score:
• Repayment behaviour
• Credit utilisation ratio
• Frequent loan applications

Q2. How can you request your CIBIL score?
Ans. Visit CIBIL official website. Then, provide the information requested in the online application form and deposit a fee to access your credit score.

Disclaimer: The information contained in this post is for general information purposes only. IIFL Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Given the changing nature of laws, rules and regulations, there may be delays, omissions or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Gold/ Personal/ Business) loan product specifications and information that maybe stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Gold/ Personal/ Business) loan.

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