Will Your CIBIL Score be affected by your Savings Account Balance? Unveiling the Truth

Having a good credit score in personal finance is essential to get a loan at the most favorable terms and credit facilities. One of the questions that comes to the minds of many is, whether the balance in savings accounts is associated with the CIBIL score or not. This article discusses this topic, addressing the direct and indirect associations between a savings balance and creditworthiness.​

Understanding the CIBIL Score

CIBIL score is a numerical value between 300 to 900 that depicts individuals’ worthiness regarding repayment of debts. This score helps lenders to understand the risk associated with giving credit. Higher the score lower is the risk, which leads to higher chances of loan approval at better interest rates.​

Direct Impact: Savings Account Balance and CIBIL Score

The misconception that the balance maintained in your savings account plays a role in determining your CIBIL score is unfounded. Instead, while different credit bureaus focus on your credit behavior (making loans, credit card usage, etc), they don’t care about your savings or checking account balances. This implies that any change (sufficient or slight) in your savings account actually does not have any immediate influence over your credit score. ​

Having a CIBIL score in itself is pretty rare in India – and the rise in awareness about CIBIL scores, though still limited, has led us to this topic, for which there are plenty of reasons.

Key elements which decide your CIBIL score.

• Good repayment history: It is necessary that you have been paying your EMIs on all your credit cards or loans timely. Defaults and consistent delays can severely bring your score down.

• This represents the ratio between the credit used and the total credit that you have available. A high utilization implies overreliance on credit, which is bad for score.

• What Type of Credit Do You Have: It is possible to use secured loans like car loans and mortgages to build credit mix. Since many people are not in the position to take mortgages, they consider utilizing credit cards to increase their credit mix. A balanced mix of secured and unsecured loans is a good sign of having responsible credit behavior and it will help improve your credit score.

• Frequent Applications: Each time you apply for a new line of credit, it results in a hard inquiry that harms your score.

• Length of Credit History: Lengthier credit history enables the lender access to greater data about repayment behavior which contributes to better estimation of creditworthiness.

Indirect Influence of Savings Account on Credit Health

However, your CIBIL score is not calculated using your savings account balance, but instead, having a savings account balance can help you practice good credit behavior indirectly and help you improve good credit habits which ultimately will improve your CIBIL score.

• Emergency Fund: Having a large amount of unspent cash, that are saved for emergencies, prior to making credit purchases, helps to avoid negative credit utilization, which in turn will lower your account utilization ratio. ​
• Credit Mantri: Adequate savings will ensure the timely payment of debts even in a financial downfall to prevent a negative payment history. ​
• Healthy Savings Balance for Loan Eligibility: Lenders may consider this balance as an indicator of financial stability and as an additional point in favor of getting approved for a loan. ​

Conclusion

Thus, in conclusion, the balance of a savings account doesn’t directly influence your CIBIL score, but healthy savings have an implied impact on making you more creditworthy. Timely repayments, optimal credit utilization, and a diverse credit portfolio constitute the best strategies to reach and sustain a good credit score.