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CIBIL and you.

The lending business operates on the basic principle of transparency and hence needs to execute a thorough evaluation of the customer’s credit history before offering credit facilities. This is done to gauge the borrowing capability of the customer and to mitigate risk

It is of utmost importance for banks to lend money to only the customers that are creditworthy. Credit information companies like CIBIL, Equifax, Experian, and High Mark Credit Information Services collect and maintain Credit reports based on the credit history provided by the banks. These credit reports help generate a credit score that helps the banks evaluate the customers’ creditworthiness.

About CIBIL:

TransUnion CIBIL is India’s first and the most trusted Credit Information Company.

They collect and maintain Credit Information Reports from banks and financial institutions detailing individuals’ loans and credit card payment history.

This CIR is then used to generate a Credit Score which helps an individual secure a loan faster and the lender can evaluate the borrowing capacity of the individual in question.

What is a CIBIL Score?

A CIBIL Score is your credit score generated based on your credit history provided in the Credit Information Report. The value of the score ranges from 300-900.

This score helps banks and other financial institutions to mitigate risk as the score is a good indicator of how likely the borrower is to default based on their credit history.

Owing to this, your CIBIL score is one of the first checks that a lender does when they are evaluating your loan application.

How to read a CIBIL report?

Your Credit Information Report is a detailed account of your credit history. The report is divided into 6 sections.

CIBIL Score: It numerically summarizes the report. It is an indicator of your creditworthiness.

Personal Information: It consists of your personal details as provided by the bank.

Contact Information: This section includes all your contact details as provided by various lenders

Employment Information: This section records your salary and the frequency at which it is paid.

Account Information: It consists of Account details and payment status. This section is a detailed account of all your credit facilities issued by various vendors and also records your payment behavior.

Enquiry Information: It has the name of the lenders who have enquired about you. The section will have four columns – lender’s name, the purpose of enquiry and number and date on which the enquiry was made.

There are two types of enquires:

  1. Hard Enquiry- It is the enquiry done by lenders
  2. Soft Enquiry- It is the enquiry done by you.

Too many hard enquiries in a short span will impact negatively as you will come across as a credit hungry individual. Soft inquiries have no impact on your credit score.

 

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