Prof. Sudindra V R
INTRODUCTION TO CIBIL
The first credit information company in India started in the year August 2000, named CIBIL-Credit Information Bureau (India) Limited and launched its operations in 2004. CIBIL was created to evaluate and make credit decision of individual loan application in India. CIBIL consists of two products, Credit Information Report and CIBIL Transunion score. Credit bureau works as a central repository, which contains the commercial and consumer retail borrower credit history. It helps both consumer and lender to reduce credit life cycle, secure faster credit and at a better return. Share holding pattern of CIBIL includes: 55% Trans Union International Inc. and remaining 45% held by Bank of Baroda, Union bank, Indian overseas bank, ICICI bank, HSBC, SBI and India Info line.
CONTENTS OF CIBIL REPORT
CIBIL Transunion score: individual credit score ranges 300 to 900.
Personal information: this section has name, Date of birth and gender reported to CIBIL by the members. The identification list reported by members or lender like passport number, PAN, Voter ID, Driver’s License etc.
Data received through an Enquiry: apart from identification list, an individual provided any other data will reflect in credit report.
Contact information: correspondence address, employment or business address, mobile number and email address information available in contact information section.
Employment information: this section consists of information on occupation and income at the time of applying for financial facility and the same will be reported by member .
Account information: it consists of details of your credit cards and loans. It contains name of the lender, type of credit facility, account number, single or jointly held, date of last payment, loan amount, current balance, and previous 36 months month on month repayment records.
Enquiry information: this section provides details regarding enquiry for financial facilities with different lenders along with name of the lender, date of application, type of loan and size of loan.
To analyze the credit and financial health of individuals credit score plays important role. Credit score is the CIBIL Transunion score consist of 3 digit numerical which summarizes the credit history of consumer or commercial borrower. The score ranges from 300 to 900, higher the credit score stronger the credit profile, lower the credit score least credit worthy profile. In some cases score can be 0 or -1. -1 score is returned for No hit or subject with only enquires and 0 is returned for subject where the earliest open trade is less than six months old.
300 is the worst score with bad credit health, where the lending institution will refuse to provide financial assistance.
Below 700 denotes bad credit, poor understanding of finance and possibly over indulgence and individual needs to improve on his credit management.
700 and above is good score, well managed credit transaction, understanding the fiancé and which can attract lender very easily.
FACTORS AFFECTING THE CREDIT SCORE
Credit score is an indication of probability of default of individual consumer based on their credit history, credit usage and loan repayment behavior.
The major factors affecting credit score includes:
– Late payment or default in the recent past: remember once individual have opted for loan never miss a payment or post pone the repayment date frequently on your loans, utility bills, mobile bills etc. which affects his/her credit score.
– High utilization of credit limit in credit cards: always have a limit in his/her credit card usage, if you are frequent user of credit card and always reach nearer to credit limit will increase the repayment burden in turn affects credit score
– High percentage of unsecured loans or large number of unsecured loan (commonly personal loan, credit card): having higher number of unsecured loans with high utilization negatively impact on credit score, as it carries higher interest rates compare to secured loans
– High number of credit enquiries in your credit report: enquiring large number of loans or credit card with too many institutions will affects the individual credit score
HOW TO IMPROVE CREDIT SCORE
– Pay the installment on loans regularly in a timely manner with diligent track of all the installment in case of multiple loans.
– Always pay full payment on credit card instead of minimum payment, in case of difficulty few time make minimum payment without fail. Credit card is on revolving basis, which helps in building a faster credit score
– Avoid taking multiple credit card or applying for multiple cards unnecessary which burdens additional credit exposure, reaching multiple credit limits and tracking payments
– If you have existing credit card and not using very frequently or low credit utilization, will positively impact on credit score
– If possible early repayment of debt or use of special income to prepay existing debts makes financial secure and helps in improving your credit score
– Avoid joint account holder or guarantor in loans or credit card facility
– Avoid settlement (final payment or settlement of loan or credit facility during distress) of your loans, it implies the inability to pay the past dues. Sometimes your settlement may be only principle amount which adversely affect the credit score
– Check your credit report for mistakes: very often with the name mismatch or date of birth matching, there are many misreporting or delayed reporting from the banks, which may result in faulty information
– Procure closure documents and report to CIBIL when there is faulty information: always remember to procure a no objection certificate letter or no outstanding payment on your loans. In case of faulty information individual can always rectify on immediate basis
The awareness of credit score and credit report is most important for an individual financial life. Credit score is an indicators of your financial health, faster and hassle free credit approval and barometric of your financial discipline. To maintain acceptable credit score one has to pay installment regularly, track the payments on regular basis, limiting the use of credit card limit, avoid partial settlement of loans, regularly monitor and check your credit score and rectify the error or misrepresentation at the earliest
– Neetu , A study of awareness about CIBIL and credit information reports among customers at commercial banks, International Journal of Research Aspects of Engineering and Management , ISSN: 2348-6627, Vol. 1, Issue 1, FEB 2014, pp. 29-34
– Dr. A. Vinayagamoorthy and M. Somasundaram, A Study on Personal Loan in India, GRA – GLOBAL RESEARCH ANALYSIS, Vol 2. Issue 5, May 2013 , ISSN 2277 8160
– Shiv Kukeja, CIBIL Credit Score – Negative Factors and Ways to Improve your Score, OneMint, 14/08/2012
– Article, Credit score below 700 is dangerous for you, Article published by IndiaInfoline.
– Creditvidya.com, Five Factors That Impact Your Cibil Score, 14th sep 2014