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Praveen Sharma
Wednesday, April 3, 2019

In today’s Indian economy, due to an increase in market orientation the investors assess two types of risk such as business risk and the other payment risk. The main target for the unlisted corporate debt is the small investors so in order to protect the interest of small investors’ credit rating concept was introduced. Credit rating is widely used by Indian companies. So it became essential to check cibil score free for various perspective as mentioned below.

Credit rating is an opinion which is formed by the rating agencies who ascertain the future ability and the obligation of an individual to meet its debt obligation when they arise. The credit rating measures an individual probability of paying back a loan without defaulting and delaying it. It is an essential tool for an individual to have access to loans and credit cards. Credit ratings act as a link between the risk and return. It helps to determine the level of the risk inherent in the instrument. With the help of, rating an investor assesses the risk level which is being associated with the debt or any other instrument and compares the offered rate of return with the expected rate of return in order to optimize his risk return.

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In India, there are mainly two regulators of credit rating Reserve Bank of India and Securities and Exchange Board of India who use the credit rating in order to determine the eligibility criteria of various instruments. Credit rating agencies have been set up with an aim to provide a rating to the company with their expert knowledge, research studies and the confidentiality of information.


The rating is an opinion which is formed by the agencies after examining all the aspects of the information through their consistent efforts. The various factors which mainly influence the credit ratings are as follows:

  • Company outstanding debt on the basis of volume and composition.
  • Company stability of future cash flow and earning capacity affect the rating of the company.
  • Likelihood of an individual to meet the fixed interest obligation.
  • The operational efficiency also affects the credit rating of the company in respect of the optimum utilization of resources and their investment.
  • A past record of the company’s promoters, directors and staff also affect the good rating of the company.


Credit rating plays a pivotal role in today’s economy. It is beneficial from the investor point of view, from a company point of view and an individual and intermediaries’ point of view.

From the investor point of view:

(i) Investment decision making: Credit rating helps the investors in making the investment decision. It gives an idea to the investor about the creditability of a company and also helps the investor to assess the risk level of a particular instrument. If the credit rating is higher than more will be the willingness of an investor to make an investment.

(ii) Provides safety: If the credit rating of a company is high then it gives an assurance of safety to the investors related to their investment and there will be also a minimum risk of bankruptcy.

(iii) Saves time and effort: Credit rating helps the investor to take the investment decision quickly by depending upon the ratings which are done by the professional cibil score repair agency. The investor need not waste his time and effort in gathering and analyzing the financial information about the credit standing of a company.

(iv) Done by expertise professionals: Credit rating is generally done by the professionals having the expert knowledge. The investors can easily rely on such ratings and make an investment decision without fear in their minds. The investor is able to know and analyze different credit instruments.

(v) Recognition of risk and returns: Credit rating is an essential tool which helps in determining the risk attached to a credit instrument and returns expected. It helps the investor to have the understandability the worth of the company.

From a company point of view

(I) Increases goodwill: High credit rating helps the company to increase the goodwill of the company thus creating confidence and trust in the minds of the investors, shareholders, customers, suppliers about the image of the company.

(II) Healthy credit score: The Company having high credit rating implies that the credit score of the company is high. A high CIBIL score paves the way for quicker loan approvals from the financial institutions at low-interest rates and they also enjoy various credit benefits like a lower rate of interest on loans.

(III) Helps in growth and expansion: High credit rating helps the company in getting the loans from the banks quickly because of the high credit score which helps the company to utilize that amount in expansion and diversification and modernization.

(IV) Ensures liquidity: In the market, a company with a good credit rating ensures liquidity for various credit instruments and mobilization of the funds.

From the consumer's point of view

(1) Helps in channelizing the funds: High credit rating companies channelize the savings of the people into productive investments which in turn increases the investment and develop saving habits among the individuals.

(2) Protection of interest: No company can try to cheat any individual with a high rate of interest without credit rating which in turn protects the interest of an individual.

From the intermediaries’ point of view:

When a company gives a rating to different credit instruments it saves time, efforts of the stockbrokers as they have to make fewer efforts in convincing their clients regarding the selection of different investment proposal.

Therefore credit rating is a tool which is needed by investors to make the investment decisions. If ratings are in a transparent and in a systematic way then it will be beneficial to investors. It is equally crucial for an individual to maintain a healthy credit score by repaying the outstanding balances on loans and credit cards timely and regularly. Having a healthy cibil score makes an individual future secure.

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