CIBIL Score
A.Sri Vijayan
You might have heard someone lamenting that he had
applied for loan for purchasing a car/ house; but the bank has rejected the
same due to adverse credit score by CIBIL.
What is CIBIL?
Credit Information Bureau India Limited is a huge data base
of credit information about borrowers (individual and establishments) and
institutional lenders.
It is an association of lenders whose members are organized
institutional lenders viz., Banks, Credit institutions, Financial organisations
who lend money to others, simply we refer to as Financiers.
What
does it do?
CIBIL collects information from its members about the credit
they advanced and the borrowers. Then CIBIL combines the information and prepare
a report about each borrower. This report is called Credit Information Report
CIR.
What
does CIR contain?
The CIR contains information about the borrower, all credits
availed by him from various financiers, repayment performance, overdue,
requests made by borrower with financiers for loan, its status, disputes,
suits, etc.
Finally, the CIR rates the performance of the borrower based
on the repayment history and gives a numerical score which ranges from 300 to
900.
Why
is important?
All the banks, while processing the loan application, get the
CIR from CIBIL, compare and analyse the score. The score is the performance
indicator of loan applicant. Higher the score, higher the assurance of
repayment; hence, the loan can be sanctioned without hazzleness.
All the banks believe that the CIR is precise and depend on
it. If the score is less or any adverse reflections are found in the CIR, bank
shall not grant loan.
Thus the CIR and CIBIL score become important for banks and
the borrowers to keep it high,
How
is the score calculated?
Credit repayment performance of a borrower is rated based on
the existing repayment regularity, amount of previous loan, utilization,
unsecured or secured, inquiries made by various lenders.
Regularity in repayment of existing or previous loan has a
vital role in ranking the score. The delayed payments or bounced payments on
loans shall reduce the score. Regular or pre-closure shall fetch more score.
Existing or pre-loan means and include loan for housing,
vehicle, credit card, house hold article and personal loan.
How
to score high?
If one have more secured loan (Housing, vehicle), it will
normally fetch higher score. On the other hand, more unsecured loans (credit
card, house hold, personal) will ordinarily reduce the score. However, the
regular repayment on unsecured loan shall improve the score.
Disputes in repayment of any loan, indiscipline utilization
or higher utilization or credit using credit card shall decrease the score.
One shall apply for loans to many financiers means that the
borrower does not have clear and specific idea about loan requirement, amount,
its purpose hence there would be a reflection of many approaches by the
borrower to financiers; this shall drastically reduce the score.
Generally speaking, one shall have clear and specific idea
about his need, shall not approach financiers without any need and shall repay
the loan regularly.
How
to get hazzle free loan?
One can apply online on the site
www.cibil.com or send the application by post
attaching the copies of proof for identity and residence and paying the
requisite fee, the CIBIL shall send the CIR.
As already told, credit score ranges from 300 to 900. A
decent score means more than 650, a high score means >800, an excellent
score means >850.
Decent score shall get the loan, high score shall fetch loans
with lesser formalities and excellent score shall bring higher amount of loan,
lesser interest rate, lesser formalities.
