In today’s financial landscape, your CIBIL score is more than just a number – it is a critical factor in determining your credit access and the terms you will receive. But Indians seem to be well aware of this fact. According to a report by TransUnion CIBIL, a credit information company, over 100 million Indians are actively monitoring their CIBIL scores as of March 2024.

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Let’s understand why regularly monitoring your CIBIL score is crucial to staying on top of your credit health.

What is a CIBIL Score?

A CIBIL score is a three-digit number summarising your credit history, rating, and report. It ranges from 300 to 900, with a higher score reflecting better creditworthiness. This score encompasses all your credit-related activities, including how timely you pay your loans, your credit utilisation ratio, and the number of credit inquiries made on your behalf.

CIBIL Score is used by banks to predict whether a potential borrower is likely to default on one or more trade lines after 91 days in the next 12 months.

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Various fintech and banking applications update cardholders with their CIBIL scores (with or without charges). However, you can also self-monitor your score by being proactive about it.

Here’s why you should monitor your CIBIL score:

1. To Take Control Of Your Finances

Credit is an integral part of your finances. The TransUnion CIBIL report shows that the number of consumers monitoring their credit profile grew by 51 per cent year-over-year (YoY) in FY23-24, reflecting that 43.6 million more consumers are intentional about knowing their credit status. By keeping track of your credit score, you become more aware of your financial health and gain control over your borrowing power.

2. To Manage Debt

Monitoring your score also helps you track and manage debt, which is vital for improving your creditworthiness. According to the report, 46 per cent of consumers who monitored their credit improved their scores within six months. This proactive approach gives you an edge in maintaining a positive credit profile.

Interestingly, the report highlights that around 81 per cent of consumers who started self-monitoring their credit score within six months of opening their first credit product were from non-metro regions.

3. For Improving Access to Better Financial Products

A good credit score opens doors to favourable financial opportunities. The report reveals that consumers who monitor their CIBIL scores are 6X more likely to open a new credit line within three months compared to non-monitoring consumers. This is because credit monitoring enables you to apply for loans or credit cards with better terms, such as lower interest rates, higher credit limits, or more favourable repayment options.

Monitoring your credit score gives insight into where you stand with lenders, allowing you to improve it before applying for a loan. It also helps you identify any discrepancies or errors in your credit report that could negatively affect your score.

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4. For Early Detection of Credit Issues

Regularly checking your CIBIL score allows you to detect potential issues, such as late payments or incorrect information before they become serious. This proactive measure can prevent surprises when applying for a loan or mortgage, ensuring that errors or missed payments do not compromise your creditworthiness.

The report shows that 44 per cent of consumers monitor their CIBIL score at least four times a year, allowing them to catch these issues early and take corrective action. If you monitor your credit regularly, you can immediately rectify any inaccuracies, improving your chances of obtaining credit at more favourable terms.

5. To Build Credit Discipline As A Young Borrower

The report reveals that young people are spearheading the credit revolution in India, with 77 per cent of the 119 million credit monitoring consumers being Gen Z and Millennials. Monitoring your credit score not only helps build good financial habits but also establishes credit discipline that will serve you in the long run.

Gen Z, in particular, showed significant growth in credit score awareness, with a 1.5X increase in the number of Gen Z consumers monitoring their credit in FY23-24. Regularly tracking their credit score allows young borrowers to access financial products that suit their needs while managing debt responsibly.

6. To Detect Errors in Your Credit Report

Mistakes in credit reports are an uncommon issue. These errors could range from clerical errors, such as misreported credit card limits, to more serious issues, like loans or credit cards fraudulently taken in your name. Monitoring your CIBIL score would help you quickly identify possible inaccuracies so you can dispute and correct them before they bring down your creditworthiness.

Contrary to popular belief, monitoring your CIBIL score is not just about keeping tabs on your credit status. Whether you are applying for a loan, a credit card, or even looking to rent a house, a healthy credit score can be the difference between approval and rejection.