- Credit Score
Please provide following details for checking your Credit Score
Would you Like To Read More about Credit Score
CIBIL which stands for Credit Information Bureau (India) Limited, is an ISO 27001:2005 company. A first of its kind, it is India’s premier Credit Information Company (CIC). Founded in the year 2000, it has established itself as a key participant of the Indian financial system. The company records credit related information of individuals as submitted by registered member institutions.
CIBIL works in association with TransUnion International Inc. and Dun and Bradstreet. CIBIL has two major segments viz. the Consumer Bureau and the Commercial Bureau. The Consumer Bureau maintains credit records of individuals while the Commercial Bureau maintains credit records of institutions/companies.
What goes into Loan approval Process?
Applicants fills a loan application form
Hands it over to the bank
Bank checks with cibil for credit score & report
High credit score leads to eligibility check basis documentation
Applying for Loan or Credit Card?
THE SCORE PLAYS A CRITICAL ROLE IN THE LOAN APPROVAL PROCESS. The CIBIL Trans Union Score is a 3 digit numeric summary of your credit history which indicates your financial & credit health. The higher your score, the higher are the chances of your loan application getting approved!
Your CIBIL Credit information report (CIR) is provided to you along with your score, because it is the basis on which your Credit Score is generated. It's a record of your credit history. i.e past loans or credit cards availed from various loan providers who are members of CIBIL.
Steps to understand about CIBIL?
Apply for loan to bank
CIBIL credit report
Loan approval based on CIBIL report
The Credit Information Bureau (India) Ltd, better known as CIBIL, is the premier agency for providing credit reports and scores pertaining to individuals. CIBIL sources financial data of individuals such as loan and credit card information from leading banks and other financial institutions in India. This data is then presented in the form of a CIBIL credit report, also known as a Credit Information Report (CIR).
CIBIL was incorporated in 2000 and has continued to expand its presence throughout the country. It is backed by Trans Union International and Dun & Bradstreet, which are major global credit bureaus and agencies.
What is a CIBIL Score?
CIBIL credit score or credit rating is, in short, a 3-digit figure ranging from 300 to 900 points which denotes a person’s credit worthiness. This figure is derived from the CIBIL report of an individual through advanced statistical algorithms that take into account their credit history including borrowings, repayment patterns, defaults in repayment and other data relevant to a person’s creditworthiness.
CIBIL scores are calculated on the basis of at least 6 months of historical financial data of an individual. The data is fed into an algorithm with 258 different variables; each with a different weightage.
Analysing your CIBIL Score
- This implies that the borrower has no previous history of borrowings with any bank or other financial institutions in the country i.e. no credit history.
- 300-600: Individuals with CIBIL credit scores in this slab are considered to be a credit risk by banks and other financial institutions. In general, credit cards and loans will not be provided to people in this slab.
- 601-750: This is the intermediate range of scores and will allow you to borrow from various lenders. However, banks may refer to your overall financial position and consider other risk related criteria to ascertain your creditworthiness e.g. stable employment, different sources of income, loan security etc.
- 750+: Scores above 750 are considered to be good and will help you in getting loan or a credit card with ease. If your credit score is high, you can leverage this to negotiate with lenders for better/lower interest rates.
Why should you get your credit information report?
- It helps in analysing your true financial standing and make plans for future finances.
- You can be on top of your borrowings and avoid debt traps.
- With a CIBIL score in hand, you are in a great position to make decisions regarding availing new forms of credit, while also being able to extract the best possible rates from banks or other lenders.
- It helps in cultivating financial discipline.
Things that positively affect your credit score
- On time loan EMI payments.
- Regular payment of credit card bills.
- Paying credit card bills in full rather than paying minimum due amount every time.
- Avoiding over-leveraging.
- Maintaining strong financial records.
- Too many forms of credit (such as unsecured personal loans) among family members.
- Proper utilization of approved credit limit.
- Ensuring banks and other financial institutions you’re dealing with record and submit positive information to CIBIL.
- Requesting and maintaining a copy personally rather than through financial institutions.
Things that negatively affect your credit score
- Too many credit report enquiries by banks and other institutions.
- Cheque bounces/dishonours.
- Irregular loan repayments.
- Defaulting on credit card bills/ making late payments or consistent part payments.
- Too much unsecured credit such as multiple personal loans.
- Multiple applications for unsecured loan getting rejected.
- Defaulting as a guarantor.
- High utilization of approved credit limit or overshooting the limit.
- Errors in record by banks and other finance institutions.
CIBIL stands for Credit Information Bureau India Ltd. It is the highest agency in India providing credit reports and ratings to individuals and businesses. It is the only one of about 1000 companies in the world with an ISO 27001 rating, which is the highest security standard in the world.
CIBIL releases credit reports called Credit Information Report (CIR) pertaining to individuals on the basis of their past credit history, which the agency receives from leading financial institutions in India. CRISIL is one of two credit rating agencies currently operational in India, the other being Experian Credit Information Company of India Pvt Ltd.
CIBIL was incorporated in the year 2000 amid heightened demand for a national credit agency that could curtail non-performing assets (NPAs), while providing borrowers the opportunity to receive credit at preferential rates based on strong CIBIL scores.
CIBIL counts TransUnion International and Dun and Bradstreet as its technical partners, both of which are leading global credit agencies. TransUnion is the lead stakeholder in the company, with 55% ownership of the overall shares, followed by ICICI Bank and SBI, each with 10% ownership; IOB, HSBC, BOI, BOB and UTI hold 5% each.
Importance of CIBIL reports
A CIBIL report is a highly valued credit report that helps banks and financial institutions analyse a person’s credit worthiness based on his/her repayment discipline and borrowing history. Major importance of CIBIL reports are:
- A unified report with all your previous and current credit history.
- CIBIL reports form the basis of releasing loans to a borrower.
- Helps in staying clear of debt traps.
- An exhaustive report to help you nurture better financial discipline.
- Better score on the credit report provides leverage when negotiating interest rates.
Types of credit reports
Credit Information Report (CIR) -
This report is available for individuals and contains all their credit history, and a statistically derived figure called credit score. A CIR is a major document which any potential lending institution will look at before processing your loan or credit application.
CIR consists of various sections detailing your credit history. Major attributes of a credit information report are outlined below.
- Payment history
This section shows your credit repayment history in the past 3 months including loans and credit card payments. DPD (Days Past Due) shows the number of days by which you delayed a payment.
- Current outstanding balance
This shows all your current credit due to be repaid. This helps in realizing where you stand in terms of EMI payments, and if you can avail more credit or not.
This section lists all the enquiries made about your credit score in the recent past. A high number of enquiries is a red flag. Potential lenders may view it as desperation for credit, also possibly because you were not a suitable candidate and had to approach multiple lenders.
- New credit facilities
In this section, you can see recent credit sanctions in your name.
Company Credit Report (CCR)
A CCR is a report outlining a company’s credit history, consolidated from the data forwarded by various banks and financial institutions in India. While CCR doesn’t substitute credit ratings for businesses provided by an approved agency, it is still an essential component when loan applications are processed by an institution.
The primary difference between a credit rating and a company credit report is that the latter is drawn up from data directly submitted by banks, while credit ratings are generally solicited by a rate and consequently issued by a relevant credit agency after evaluating related documents and interviewing company’s management.
CCRs are typically used by lenders to make quick, informed decisions on loan approvals. A good CCR can be used to get better terms on credits from become partners, being testament to a company’s strong financial standing.
Importance of CIBIL Score
CIBIL score is a numeric summary of one’s credit history and it helps one get their loan applications evaluated and approved. Banks and other financial institutions rely on CIBIL scores to evaluate the potential risk posed by lending money to consumers and to mitigate losses. CIBIL score plays a very important role in India’s financial system and helps consumers secure credit quicker and also help loan providers manage their business efficiently.
How are CIBIL scores calculated?
CIBIL scores are calculated based on various factors such as one’s payment history, number and type of loan accounts, length of one’s credit history, outstanding debt and many other factors. Once the CIBIL score is calculated, it is sent to banks and financial institutions for evaluation. Each bank or credit institution has its own benchmark that constitutes as a good score. It differs across banks.
Factors that don’t affect your credit score
- Savings accounts
- Race/ Ethnicity
Why are CIBIL scores important?
CIBIL scores are very important when it comes to availing credit, especially loan approvals. The banks check your CIBIL score or credit score through CIBIL. A CIBIL score helps determine your creditworthiness which in turn will help you avail loans faster and easier.
When a borrower applies for a loan or credit card at a bank or a financial institution, the lender checks the credit or CIBIL score first to determine if the applicant is eligible to avail the loan. The lender will not consider or reject an application if the CIBIL score doesn’t meet their expectations or if it’s too low. But if the credit score is high, the lender will consider the application and move on to evaluate other factors before approving the application.
Your CIBIL score acts as the first impression for the lender, the higher the score, the better chances of the loan/credit card being approved.
How does my CIBIL score matter?
Your CIBIL score is one of the main factors that determine your eligibility to avail a loan or a credit card. CIBIL scores can affect your financial journey depending on how good or bad it is.
Listed below are the aspects influenced by your CIBIL score.
- Credit approvals
- Interest rates
- Approval for housing
- Other factors
Your approval of credit by a bank or financial institution is mainly based on your CIBIL score. Lenders need to know if you are a reliable candidate before granting you credit and CIBIL score helps in determining your eligibility to avail credit. A bad CIBIL score will lessen your chances of getting credit without any hassles. A good CIBIL score is a must to avail a credit card, home loan, mortgage loan, personal loan, car loan or any other types of loan. It is still possible to avail credit without a CIBIL score but this will result in borrowing from unreliable lenders with high interest rates.
A good CIBIL score will help you get the best interest rates and terms. Higher the credit score, better the interest rate. A good CIBIL score will help you save money.
A good credit score will ensure that you get approved for a new housing loan or rent. Your credit score will act as a deciding factor here and hence, it’s important to have a good credit score.
CIBIL scores not only affect your ability to get favourable loans and good interest rates but it will also help in getting approved for a new cell phone plan or help you get lesser insurance premiums.
Consider two people, A and B, A has a CIBIL score of 650 and B has a CIBIL score of 750. They both take a home loan of Rs.4 lakhs for 6 years. A will end up paying Rs.7 lakhs more in interest than B. This is because B will get better interest rates than A since B has a good CIBIL score.
Advantages of a good CIBIL score:
- Ability to get a line of credit easily.
- Quick approval for mortgages.
- Low interest rate credit cards.
- No security deposit on cell phones.
- More negotiating power.
- Get approved for higher limits.
- Easy approval for rented/leased houses and apartments.
- Low interest rate home loans and car loans.
CIBIL scores play a very pivotal role in your financial journey. A bad CIBIL score or credit score is not acceptable to any institution and might hamper your chances of getting credit or availing other advantages of having a good score. Responsible use of credit, making payments on time and having an optimum number of loans and credit cards will ensure a good CIBIL score, thus, ensuring a smooth financial journey.
How to Improve Credit Score?
Credit score or credit history is one of the prominent factors in applying for a personal loan, home loan, car loan and many others. Improving credit card history is quite a difficult task but totally worth the effort. Credit scores are based entirely on the information found on an individual’s credit report and any changes to the credit report affects the individual‘s credit score. There are certain things which you need to do if you want to improve your bad credit history.
- Check for any mistakes on your file. Even a wrong address can affect your credit score. Check all the details and report any incorrect information immediately.
- Paying your bills like phone bill, utility bill etc on time is a good way to prove your lender that you are capable of managing finances.
- Check if you are linked to any other account of your family member. If they have a poor score, than it can affect your score as well.
- Check for any fraudulent activity on your credit report. If someone applied for credit in your name without your knowledge than contact the credit reference agency as soon as possible and get it corrected.
- Receiving any court judgements for debt, will have a serious impact on your credit score. You should seek advice in case of any problem.
- Eliminate any outstanding debt before you apply for a new credit. If you already have a lot of existing debt than banks might hesitate to lend you more.
- If you are living at one address for a considerable period, lenders may feel more comfortable to provide you with more money.
How Long will it Take to Rebuild a Credit Score?
Improving one’s credit card is a very time consuming process. It is like running in a marathon. There is no quick fix for bad credit scores. The negative element that are responsible for your bad credit score will continue to affect until they reach a certain age. Such as-
- Delinquencies remain on your credit report for seven years.
- Most public record items remain on your credit report for seven years, although some bankruptcies may remain for 10 years and unpaid tax liens remain for 10 years.
- Inquiries remain on your report for two years.
Building your credit score takes time and there are no shortcuts available. All negative information will eventually cycle off your credit report. Till than you can focus on the things that you can positively influence like paying the bills on time.