One important thing to be noticed by the money lending institutions before lending money to any borrower is the risk involved in lending to that particular borrower. And this is assessed by help of CIBIL score or risk index calculation. These two assessments carefully track the past credit history and on basis of the same provide a borrower with CIBIL score or risk index. Which further suggests if the borrower is fit to be lent or not
CIBIL score and risk index are the primary level of short listing the long list of money borrowers. However the money lending institutions cannot leak the criteria of short listing the borrowers as it would create commotion and panic among the borrowers. Sometimes when the CIBIL score or risk index are not in good shape then some institutions and websites offer the borrower a chance to improve their CIBIL score by paying additional amount of money (keep in mind that this is of no use as top money lending institutions would ultimately look for your past records, basically 6 months). CIBIL score is analyzed o the basis of credit history of the last 6 months, the offered is basically between 300-900 whereas the risk index is calculated where the borrower is having a credit history of less than 6 months or no credit history. The risk index is offered from 1-5.
In case of assessing the borrowers, they are all put into 3 major categories;
In this case the index is notified as NA (not available) or NH (no history). Anyways this is not considered as low score by any means, yet some institutions don’t lend money if an individual has no credit history as the person is a total surprise with no negative points yet has a lot of risk involved.
In this case CIBIL offers risk index to the individuals as per the nature of their credit history. Risk index is marked between 1 to 5 and the lower the number the greater the risk and the greater the number, much is a possibility of being awarded with a loan.
è Index 1 and 2 refer to a situation of high risk.
è Index 2 denotes medium risk.
è And index 4 and 5 denote lesser risk
In this case individuals are marked with CIBIL scores. The higher the score obtained the lower is the risk involved and vice-versa. To categorize:
Hence you don’t just need good CIBIL score/risk index but also a pinch of luck to be awarded with a loan from a bank.