KNOW THE CREDIT SCORES THROUGH CIBIL

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What is CIBIL?

Credit Information Bureau Limited is India’s first Credit Information Company, founded in August 2000, with its headquarters in Mumbai Maharashtra. It collects and maintains the records of the customers pertaining to their payments related to loans and credit cards. This information is submitted to CIBIL by various member banks and financial institutions by the way of monthly reports. By the help of this record, a credit score of a person is generated. This score, popularly known as CIBIL score is the evaluation of credit worthiness of a person. By the way of data available with it, a report known as Credit Information Report (CIR) is prepared by CIBIL which contains the details regarding all the loans of a person and the details of its repayments. CIBIL score is also a part of such report and finds its place on the very first page of the report.

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Uses of CIR

Credit Information report (CIR), also known as CIBIL report holds a lot of relevance and have now become a very useful tool for lenders in their decision making regarding whether or not to give a loan and the extent to which a loan can be given to a person based on its CIBIL score. Where CIBIL score is a parameter for judging the credit worthiness of a person, the CIR is a detailed description of the various past and present loans, whether running or closed and contains the following details-

1. Name of the Person
2. CIBIL score
3. Running loans from the member Institutions
4. Type of loan
5. Ownership, whether single or joint
6. Amount of loan taken
7. Balance unpaid
8. EMI of the loan
9. Details of EMI payments regarding time lags, if any
10. Whether the loan is closed or not
11. Details of the credit cards running
12. Credit limit of the card
13. Balance Amount Left that can be utilised
14. Whether or not closed

The report may or may not contain the name of the financial institution. Also, the delayed past due status may also be either in number of days or if not disclosed, it may be undisclosed. If the same is undisclosed it is shown by the way of (XXX) sign . Lending institution can hence make effective use of the information so available through CIBIL report and make a decision as to whether or not to sanction a loan.

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CIBIL Score

CIBIL TransUnion Score or a CIBIL score is a 3-digit number ranging from 300 to 900. It is the score for the credit worthiness of a person. In a nut-shell, higher the score, better it is. We can say that a person with a high CIBIL score is more likely to repay the EMI and be regular in his EMIs as compared to the person with a lower CIBIL score. Also, a person with a higher CIBIL score is likely to get the loans easily as compared to the one with a lower CIBIL score. Now big question that arises is that what will be the CIBIL score of a person who has had no credit history at all? What about a person who has neither taken a loan nor a credit card ? What about his CIBIL score? The CIBIL score of such person is (-1). Now, here CIBIL score is negative. This doesn’t mean that the person’s Credit worthiness is very bad, but it means that there is no available credit history of that person. As mentioned earlier, CIBIL score of the people with credit history would range between 300 and 900

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Tips for higher CIBIL Score

Now, since we know how important the CIR and CIBIL score is for the purpose of obtaining a loan, here are a few quick tricks to maintain a good CIBIL score.

1. Pay your EMI on time and ensure that your CIR does not show any delayed Past due (DPD)
2. Use your credit card wisely and pay on time
3. Avoid a lot of consumer loans, eg. Loan for buying a mobile phone. This will adversely affect your CIBIL score
4. Maintain a mix of Secured and unsecured loans. Secured loans, like a home loan has a positive impact on your CIBIL score whereas an unsecured loan such as an auto loan has a negative impact. Therefore restrict the composition of the unsecured loans to a maximum of 20% of your total loans.