September 3, 2024 · 11 mins read
Is 720 a Good CIBIL Score? What It Means for You
Santosh Kumar
A CIBIL score is like a grade that shows how well you handle money, especially when it comes to borrowing and paying back. The number ranges between 300 and 900. Now, the question is- “Is 720 a Good CIBIL Score?” If you have a CIBIL score of 720+, it is really good. A 700+ CIBIL score is good, whereas a below 640 CIBIL score isn’t that great. You can get approved for loans or credit cards easily with a 700+ CIBIL score.
A high score means you’re more likely to repay what you borrow. So you're in good books now. Banks and credit card companies trust you. Your past credit behaviour drives your credit score. During the loan approval, lenders use the score to give you credits. Continue reading if you want to learn what a good credit score is, the benefits of maintaining a high credit score, what affects your credit score, how you can build or improve your credit score, and more.
You might consider credit score as a ranking that keeps track of how you're repaying your loans. It’s a bit like your driving record—no accidents or tickets? That shows you’re a responsible driver. Similarly, a solid credit score indicates that you have borrowed credit and repaid responsibly in the past.
To track this, the Credit Information Bureau India Limited (CIBIL) plays a crucial role. It has access to the credit records of nearly 600 million people in India and all financial transactions, whether you’ve borrowed or repaid money. In addition, there are over 2400 members of CIBIL, including different kinds of lenders. The terms "credit score" and the “CIBIL score” are the same.
Also Read: What is the Use of CIBIL Score?
Your credit report tracks the following parameters:
1. Payment History: Are you paying your credit bills on time or not
2. Credit Utilization: How much maximum credit limit are you using?
3. Credit Length: How long have you had credit accounts?
4. Credit Mix: Are you only into credit cards or taking loans as well?
5. Recent Credit Inquiries: How often do you apply for new credit?
Each of these factors is important. Together, it shows how trustworthy you are when it comes to money. And that is exactly what your credit score shows.
A good credit score offers the following benefits:
1. Higher chances of approval: A high credit score shows how well you manage money. Lenders check if you’re good at paying back the money you’ve taken. Their risk comes down. As a result, financial institutions trust you and are more likely to say “yes” when you ask for credit.
2. Lower interest rates: As you're trustworthy with money, banks will charge you less interest rate when you borrow from them. In the end you have to pay less interest in the long run for loans as well as for a credit card.
3. Access to pre-approved loans: A high credit score is like a VIP pass. As financial institutions already trust you, they will offer you pre-approved loans or credit cards easily. Moreover, you can get the money faster, with less paperwork and waiting time.
4. Access to premium credit cards: Lenders check your credit score as soon as you apply for a credit card. A good score can give you access to premium credit cards. These special cards come with extra reward points, cashback, and exclusive services. However, you may also need to meet some other requirements to get them.
What if you lose your job or don’t have a steady income—can you still get a credit card? The answer is yes; you can get a credit card without income proof. However, banks want to be sure that you can repay. So, they put some extra limitations.
There is no set score one needs to get a credit card. But, the requirements vary with different companies. A 600 CIBIL score makes you eligible to get a credit card. However, higher credit scores have their own benefits. If your CIBIL score is 750+, that’s a good score for getting a credit card.
Also Read: Is 650 a Good CIBIL Score?
The utilization rate, or usage rate, shows your credit card limit. It illustrates how close you are to "maxing out" your credit cards. To calculate this, you divide the amount you owe by the card's limit and then multiply by 100. To find your total utilization rate for all your cards, add the balances and divide by the total of all the spending limits. The lower this percentage, the better it is for maintaining a good credit score.
Most experts say that if you use more than 30% of your credit limit on any one card or across all your cards, your credit score starts sinking. The closer you get to your maximum credit limit—the more your score will drop.
You don't need a minimum credit score to apply for a home loan. Banks and other financial institutions look at how well you've handled credit in the past and whether you can repay the loan. Before approving or denying your loan, they check your credit score with CIBIL. This check, a hard inquiry, can slightly lower your credit score. Although there's no minimum score, it's a good idea to keep your score at 750+ to get a home loan with lower interest rates.
If you have a low credit score, apply for a secured credit card. However, such cards need collateral, like a savings account or fixed deposit. In case you have a fixed deposit of INR 50,000, and your credit card limit might be a tad lower than that amount. The bank uses your deposit as security in case you default.
Some lenders don’t ask for proof of income while applying for a credit card, so you may also apply for a credit card for a homemaker. In addition, if you’re an add-on cardholder on your spouse’s credit card, you may also use their credit card.
Also Read: How Students with No Income Can Get a Credit Card
In India, banks may give you double the credit limit on your monthly income on a credit card. You may get a minimum INR 60,000 credit card limit for your Rs 30000 salary. The maximum credit limit can be increased up to INR 90,000, which is three times your monthly salary.
The credit limit is double or triple your monthly income. The actual credit card limit varies based on the following factors:
1. Credit score: Are you paying back the required money and on time?
2. Job status: Do you have a steady job or income source?
3. Credit history: What does your financial history look like?
4. Current debts: Are you already carrying any loans or credit card balances?
For example, if your monthly salary is ₹50,000 and you have a 750+ credit score, you could qualify for a higher credit limit that may even go up to ₹450,000.
Credit cards for 19-year-olds or student credit cards help college students manage their money. These cards allow you to purchase without paying any interest for some time. In addition, you may earn rewards and discounts. They come in two types: basic and secured (where you need collateral). A student credit card helps you to learn how to handle money responsibly while you’re still young. Eighteen years students or older can apply for these cards.
Although no minimum CIBIL score is needed to get a personal loan, 750+ is considered a good score. A high score can give you more loan options. You may get a larger loan amount with lower interest rates. The institution may also allow you a longer time to pay it back. A personal loan is called an unsecured loan because you normally don't give the bank or lender any collateral like you would with a home loan or car loan without security at a higher risk.
While using your debit card, you are spending your own money directly from your bank account. So you don't owe anything to the bank. Debit cards usually limit the maximum cash you can take out daily. However, banks don't charge interest because you don't borrow from them. Compared to credit cards, you don't get any rewards or cashback on debit cards, so it is no help with your credit score.
When you use your credit card, you borrow money from the bank for payment. You buy something with your credit card and decide to pay for it later. You can pay back the money all in one go or in smaller portions over time. The bank will charge you fixed interest if you don't repay the borrowed money within the due date. On top of that, if you're late, they might add a small fee.
Increase your credit score in six months by following these steps:
1. Pay on Time: Pay your bills on schedule. You can also set up auto-transfers for timely payments.
2. Debt Reducing: You can pay off any outstanding balances, as unsettled debts can lower your CIBIL score.
3. Maintain Multiple Credit Cards: Do not cancel all your old credit card accounts. This will give you a longer credit history.
4. Avoid Credit Queries: Don't apply or raise queries for new credit cards or loans too often.
5. Increase Credit Limit: An increased credit limit gives you additional flexibility and helps you to keep your credit limit higher with low utilization.
6. Maintain a healthy balance: You must maintain secured loans, personal loans, and credit cards.
So, to answer your question, “Is 720 a good CIBIL score? Yes, it is a good CIBIL score. Work towards a 720 credit score. You'll get better deals on loans and credit cards. Once you reach that number, work smart to keep it. Building a good score takes a few months and depends on the individual situation. Stick to the points mentioned above, and your score will improve. With time, you may even qualify for lower interest rates.
What are the factors affecting my CIBIL score?
Ans. Improper use of factors like payment, history, utilization, and types of credit cards affects one’s credit history.
Can I improve my CIBIL score?
Ans. To improve your CIBIL score, you have to make timely payments, keep your credit balance low, keep a healthy credit mix, and limit new credit inquiries.
Can a CIBIL score of 720 help me to get a loan?
Ans. Yes, a CIBIL score of 720 is considered eligible for any loan. But, based on that score, the terms and conditions for a loan may vary.
Is the “CIBIL score of 720” excellent?
Ans. A CIBIL score of 720 is marked “good: only. It is not marked as “excellent.” If you want an excellent CIBIL score, you must achieve a 750+ CIBIL score.
Can a CIBIL score of 720 get me a credit card?
Ans. Yes, a CIBIL score of 720 is good enough for getting a credit card. However, credit cards may also have limitations.
Can a CIBIL score of 720 qualify me for a mortgage?
Ans. A CIBIL score of 720 can qualify you for a mortgage. However, the terms and interest rates offered may vary based on the lender's criteria and other factors.
Is a 720 CIBIL score good for a car loan?
Ans. If you have a CIBIL score of 720, it qualifies you for a car loan. You must check the terms and conditions of a car loan first before taking out the loan.
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