CIBIL and Housing Loan

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.