Home Financial & Banking Terms What is Credit Rating?

What is Credit Rating?

Credit Rating

Credit Rating refers to the study of the credit risks and history of an individual or a financial entity or an institution. Credit Rating is the rating given to any of the above, on the basis of their credentials, in the terms of their lending and borrowing ability.

Credit Rating is usually in the form of a comprehensive report which is prepared on the basis of the credit worthiness and the history of lending and borrowing of the individual or the institution. This statement helps in the evaluation of the solvency of that particular entity.

The CIBIL Score

Established in 2000, CIBIL refers to the Credit Information Bureau (India) Ltd and this the primary agency that provides credit rating and scores to individuals. The credit rating given by CIBIL is a three digit number, that ranges from 300 to 900 points. This rating or score determines a person’s credit worthiness. This score is calculated by taking into account a minimum of 6 months financial record of an individual.

Importance of CIBIL Score

CIBIL score is important for both, the banking institutions and the individuals. This score helps the banking institutions to manage their lending business in a better way. For individuals, this score is useful as it plays a vital role in loan approval process. Most banks usually look at this score before considering a loan application. The higher the score, higher will be chances of your application getting approved.

Check your CIBIL score

One can check his/her CIBIL score online through CIBIL’s official website. One is required to fill an online application form and submit it by paying application fees. This can also be done by sending a the application to CIBIL by post.