CIBIL is an acronym for Credit Information Bureau (India) Limited. It is India’s first credit information company, or credit bureau, and was founded in August 2000. CIBIL provides its members information regarding commercial and consumer borrowers in the form of credit information reports. This information pertains to borrowings related to loans (both secured and unsecured) as well as credit card accounts.
CIBIL’s members include banks, NBFCs, housing finance companies, credit card companies and micro-finance institutions (MFI). As per the recent Reserve Bank of India’s (RBI) guidelines to financial institutions, all lending institutions necessarily need to be members with all bureaus, and hence even without an MFI bureau, MFIs are now members with CIBIL and accordingly provide them with relevant data.
CIBIL is licensed to operate in India by the RBI and comes under the purview of the Credit Information Companies Regulation Act (CICRA), 2005.
To ensure customer confidentiality and data security, CIBIL employs state-of-the-art technology to maintain data sanctity, aligned with global best practices.
What role does CIBIL play?
When it comes to financial services, lenders rely to a very large extent on credit reports as the scores contained therein are a good indicator’s of a customer’s creditworthiness. Simply put, a report helps a lender estimate the probability of a customer defaulting on a loan, and hence whether lending to the customer would be risky or otherwise.
What is a credit/ CIBIL score?
A credit score is a three-digit representation of your credit history, derived from your credit report. Typically ranging between 300 and 900, a higher score indicates that the consumer is more likely to be creditworthy.
With CIBIL being the oldest credit bureau, the term ‘CIBIL score’ is often used colloquially instead of ‘credit score’.
Why you should know your credit score
A credit score plays a very critical role in the loan and credit card approval process. Very often, the credit score can be the deciding factor between loan approval and rejection. At the very least, a good score ensures that when you apply for a line of credit, you are offered the same at the best possible terms and competitive interest rates. However, do keep in mind that CIBIL itself does not play a role in the lending decision – loans and cards are approved solely at the discretion of the lender.
Further, in today’s digitised times identity theft is on the rise. Simply put, identity theft occurs when your personal information is accessed or ‘stolen’ by someone in order to apply for a loan or credit card in your name. This results in a record on your credit report, and if the loan goes ‘bad’, it is your credit score that will take a hit.
Hence, it is imperative to keep track of your credit score. Ideally, you should call for a copy of your report at regular intervals and check the information for any inaccurate data, which should then be brought to the notice of CIBIL immediately for rectification.
How can you check your CIBIL score?
Checking your CIBIL score has never been easier! You can log on to the CIBIL website, www.cibil.com and request for a copy of your credit report. For a nominal fee, you will gain access to the report in entirely, with a hassle-free online process, following which your report will be made available within a very short span of time.
Further, websites such as www.freescoreindia.com also offer you a free credit score.
It is prudent however to call for a copy of the entire report and not merely check the score.
Factors that affect your CIBIL score
The below mentioned factors can impact your CIBIL score:
- Repayment track record – Your payment history plays a major role in creating a good CIBIL score. Any delayed or skipped payments have an adverse impact on the score, so make sure all your payments are timely. It can otherwise indicate to a lender that you may not be financially solvent, as you are unable to keep up with repayment schedules.
- Credit limit and utilisation ratio – While an increased credit limit is indeed a feel-good factor, it can also have a negative impact on your score as it could indicate your heavy reliance on debt to meet possibly even daily needs. Hence, ensure that your credit limit is ‘just right’ – too little may defeat the purpose of maintaining a credit card, while one too high may also go against you in your credit report.
- Each card also comes with a pre-determined credit limit. The ideal usage would be 30% of this limit, as anything over that could again indicate financial strain. Therefore, use your credit cards well.
- Healthy credit mix – Having a mix of both secured as well as unsecured loans on your record are good for your score, as this indicates that as a borrower, you can handle debt responsibly.
- Multiple loans and cards – Apply for credit when you really require it. While getting a new card for its attractive features may be tempting, refrain from doing so as having an excessive number of open accounts affects your score, and when you do need credit, a lender is likely to proceed with more caution than required as a result.
How can you improve your CIBIL score?
Following are the ways in which you can better your CIBIL score:
- Make timely payments on all loan and credit card outstanding.
- Keep your card outstanding balance low and maintain a low credit utilisation ratio.
- Review your credit report at regular intervals by calling for a copy of the same.
- Consider availing of the services of a credit health management company such as Credit Sudhaar, for professional help to not just build but also enhance credit score.
In conclusionStaying credit healthy is crucial to your financial health, hence familiarise yourself with CIBIL and your credit report and work steadily towards financial fitness.