What is CIBIL?
CIBIL stands for Credit Information Bureau (India) Limited. It is the first credit information company in India, established in August 2000. The company collects and maintains credit records of individuals as well as commercial entities. This includes borrowing and payments related to loans and credit cards.
CIBIL obtains this information with the help of its associate partners which include members of banks and credit institutions. Information is provided to CIBIL on a monthly basis based on which CIBIL prepares a Credit Information Report (CIR) and credit score of an individual. This report is then provided to credit institutions, when requested, to help them evaluate and approve loan/credit applications.
Role played by CIBIL
CIBIL plays a major role in India’s financial system by helping banking institutions better manage their business and be helping customers secure credit on fair terms. CIBIL is also referred to as the Credit Bureau. It is licensed by the RBI and governed by the Credit Information Companies Regulation Act, 2005.
What is a Credit/CIBIL Score?
A credit score is a three digit numeric summary of your entire credit history. It is prepared based on the information provided in your Credit Information Report. The credit score normally ranges between 300 & 900.
Why is knowing about CIBIL score important?
CIBIL plays a major role in loan application and approval processes. Without a satisfactory CIBIL score, you may not be eligible for many loans.
After you fill and submit your loan application form, a bank will first check your credit score and credit report. If you have a bad credit history and a low credit score, the bank may reject your loan application outright. Only if your credit score is good, will a bank consider your loan application and pass it through for approval.
CIBIL scores are the deciding factor for many banks when it comes to considering your application. The higher the score, the higher the chance your loan application will be reviewed and approved. However, the decision to approve your loan application is completely dependent on the bank; CIBIL as an institution does not play any role here.
How to find your CIBIL score?
You can check your CIBIL score online. An online score request form is available at CIBIL’s official website. It is both easy and convenient and the entire process is completed in a matter of minutes for a nominal fee.
To initiate the process, the first thing you need to do is to fill the online application form by entering your personal details like your name, date of birth, address, phone number, income, identity proof, and address proof.
Once, you fill all these details and click submit, you will be directed to a page where you will have the option to make payment. The fee charged is Rs. 470 and payment can be made either by using your credit card, debit card or through net banking.
After the payment is done, you will have to submit a few authentication details. Once authentication is successfully completed, you will get your CIBIL score via e-mailwithin 24 hours.
Checking for your credit score online is very quick and simple. Check your credit rating from time to time, and if it is low, you can take the required steps to improve it.
What can affect your CIBIL score?
Mentioned below are a number of factors that may affect your CIBIL score.
- Payment history: Your payment history plays a major role in developing a good CIBIL record. Making late payments on credit cards or delaying/defaulting on your EMIs regularly can negatively affect your credit score, indicating that you are not serious about or capable of clearing your existing debts.
- Increased credit limit: Increasing the current balance of your credit card may negatively affect your credit score since it is considered to enhance your repayment burden. However, increased spending on your credit card does not affect your credit score as long as you’re credit utilisation is in proportion to your credit limit.
- Unsecured loans: A high percentage of unsecured loans such as personal loans and credit cards may affect your credit score. A balanced combination of secured and unsecured loans adds positively to your credit score.
- Multiple loans & Credit Cards: If you have multiple loans, credits cards and new accounts, this may affect your credit score, and banks may review your loan application more carefully.
How to improve your CIBIL score?
- By maintaining a good credit history, you can improve your credit score. In order to improve your credit score, you need to maintain the following points:
- Make sure you pay all your debts on time. Late payments are frowned upon by banks.
- Keep a check on your credit utilization and keep your outstanding balances low.
- Try to maintain a healthy combination of credit which includes a healthy mix of secured and unsecured loans.
- Opt for new credit in moderation and cautiously.
- Monitor your single and joint accounts regularly to ensure no payment is missed by either you or your partner.
- Review your credit history from time to time which you can do by purchasing your credit information reports from time to time and rectify errors or issues.
- If you follow the above mentioned steps, you can avoid the risk of your loan application being rejected by banks. It is advisable to maintain a good credit history as it is the most important financial report card that can help you avail loans without difficulty.
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