Friday, 15 January 2016

Why pay for CIBIL Score?

A credit score is fast gaining acceptance as one of the primary sources of information regarding an individual’s financial health. When you choose to apply for any credit facility, be a loan or credit card, the lender pulls out a copy of your CIBIL report and checks the score. This can be the deciding factor between a loan being approved or declined.
Of course, with the score being only one of the factors taken into account, chances are that while the loan application may indeed be approved, it may not be at the most competitive terms. For example, a person with a higher score may get a loan at a lower rate of interest, while another individual may get the same amount sanctioned at a higher rate. Thus, a credit score can help you save money in the long run.
 What is a CIBIL score?
A credit score is generated by a credit bureau, or credit information company. In India, there are four such bureaus today, namely CIBIL, Equifax, Experian and CRIF High Mark. With CIBIL being the oldest bureau, very often a credit score is referred to as a CIBIL score colloquially. However, a credit score from any bureau will provide you with similar information.

While the score itself is typically between 300 and 900, it may differ slightly from bureau to bureau, however the algorithms used to derive a score are similar.
Where can I get my credit score?
You can get a copy of your credit score from any of the above mentioned bureaus. The process is simple and hassle-free, and on payment of a nominal fee you can avail of the same.  
Of course, brings you the option of viewing your CIBIL score at no cost. This however does not include the detailed credit report, but only the score in isolation. Hence if you only wish to keep track of your score and estimate your creditworthiness, this is a good option to avail of.
Why should I pay for my CIBIL score?
Let us take a scenario wherein you apply for a loan. When the lender receives the application, they call for the credit report and go through it at length. Hence, if you purchase the CIBIL report, you also have complete access to the information therein. It is prudent to call for a report well before applying, so that you know where you stand. If your score is low, you have sufficient time to work towards improving it before you make the loan application.
While going through the report, if you find any incorrect information, or account data that does not pertain to you, immediately bring it to the attention of the concerned bureau. If the information is incorrect (for example, a closed credit card that continues to show as an open account) it can be rectified.
Equally grave is a situation wherein say a personal loan is live on your report, but you haven’t availed of the same. In such instances, it is likely that you have been a victim of identity theft, and that someone is opening new lines of credit under your name having obtained your personal details, including identity and address proof. This can prove to be a problem in the case of default, as the lender will get back to you for non-payment of dues.
What should I do next?
The first step now that you have your credit report would be to go through it and understand where you stand with regards to your credit health. If you find the information contained therein difficult to interpret or think that your score could be better, consider getting in touch with a credit health management company for assistance.
In tandem with trained credit counsellors you could work on improving your CIBIL score. While there is no quick-fix, immediate solution to increase your score, over a period of time and with some financial discipline it is possible to achieve the same.
Hence, paying a small price to obtain your score can result in some well-deserved peace of mind about your financial health.

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