Know all about CIBIL Score /Credit score and How to improve CIBIL or Your Credit score?

At first let’s understand what CIBIL Score is and then come to how to improve your credit score

Who monitors and keeps data of your CIBIL score (Credit score)?

Credit Information Bureau (India) Limited is India’s first Credit Information Company (CIC) founded in August 2000. CIBIL collects and maintains records of an individual’s payments pertaining to loans and credit cards. These records are submitted to CIBIL by member banks and credit institutions, on a monthly basis. This information is then used to create Credit Information Reports (CIR) and credit scores which are provided to credit institutions in order to help evaluate and approve loan applications. CIBIL was created to play a critical role in India’s financial system, helping loan providers manage their business and helping consumers secure credit quicker and on better terms.

For credit grantors to gain a complete picture of the payment history of a credit applicant, they must be able to gain access to the applicant's complete credit record that may be spread over different institutions. CIBIL collects commercial and consumer credit-related data and collates such data to create and distribute credit reports to its Members which are credit institutions and banks in India. CIBIL’s over 900 strong member base includes all leading public & private sector banks, financial institutions, non-banking financial companies and housing finance companies.

CIBIL’s products, especially the Credit Information Report (CIR) and CIBIL Transunion Score are very important in the loan approval process. Once the loan provider has decided which set of loan applicants to evaluate, it analyzes the CIR / Score in order to determine the applicant’s eligibility. Eligibility basically means the applicants ability to take additional debt and repay additional outflows given their current commitments. Post completion of these first 2 steps the loan provider will request for the applicants income proof and other relevant documents in order to finally sanction the loan.

The CIR and Credit Score not only help loan providers identify consumers who are likely to be able to pay back their loans, but also help them to do this more quickly and economically. This translates into faster loan approvals for consumers. An individual with a credit score above 750 has better bargaining power with the lenders, since he is perceived as a responsible borrower. Since consumers can now access their Credit Scores and CIRs directly from CIBIL at the cost of INR 500, they can see for themselves how they are perceived by the lenders before applying for a loan. Hence, CIBIL empowers both loan providers and individuals to see their financial and credit history more clearly and hence, take better and more informed decisions.

CIBIL houses credit on over 220 million trades across individuals and businesses, organized into two divisions, Consumer Bureau and Commercial Bureau.

The Consumer Bureau was launched in 2004 with 4 million records, and now maintains more than 260 million records. The Commercial Bureau was launched in 2006 with 0.7 million records, and now maintains more than 12 million records.

CIBIL is the most recognized security standard in the world. CIBIL is one of the 1000 companies in the world, which have achieved ISO 27001 certification, and one of the first few in India.(Source : CIBIL website)

No one can play with your CIBIL score, its just explanation of your standing in terms of credit obligation in the past credit lines taken may be by way of credit card bills or loan repayments.

Tips to improvise your CIBIL/credit score

Your CIBIL score is a three digit number, in the range 300-900. In today’s date this number has assumed immense significance with banks not willing to lend to anyone who have a score below 750. It is a good financial practice for you to make a constant effort to improve CIBIL score, as the Reserve Bank of India, the central banking authority in the nation has made it mandatory for all lenders to refer to the CIBIL score as an integral part of their credit assessment process. Therefore it makes sense for you to enhance your credit score, if you are slightly below the 750 mark, or want to improve CIBIL score from the level of 750. If you are wondering how to increase your CIBIL points, here are some quick tips that you will find useful.

It is important to note that if you have not taken any credit limit or even credit card in your life then you may not have your CIBIL score.

Monitor your utilization level of credit limits

In financial parlance, credit utilization refers to the total amount of credit you are using vis a vis the total amount of credit that is available to you. If you want to increase credit score, you must ensure that the total utilization of credit remains below the level of 50%. So, in other words if the limit on your credit card is Rs 5 lakh, do not go ahead and spend all of it each month. In fact, when your credit limit is Rs 5 lakh, you should use not more than Rs 250,000 each month and repay the outstanding balance in full within the billing cycle. Credit utilization is an important factor that impacts your CIBIL score, so keep a strict check on it. Enhanced use of credit, indicates a heavier repayment burden and can bring your score down.

Don’t borrow too much of Unsecured loans have a balanced approach

In order to increase credit score, you must have a good mix of secured and unsecured loans. Home and auto loans can be categorized under the secured category while, personal loans and credit cards feature under the unsecured category. If your credit portfolio has a larger quantum of unsecured loans, your CIBIL will reflect the fact that your repayment burden is higher and may be viewed as a negative by lenders.

Make all your repayments on time keep reminders on your cell phone

Whatever credit you have availed of, be it credit cards, home, auto or personal loans, make sure that strictly adhere to the repayment schedule. Even a single missed payment can prove to be detrimental to your CIBIL score. With credit cards you have to be extra cautious, as you can quickly go over the top with credit card usage. Do ensure that whatever you spend on your credit card, you repay in full within the billing cycle. If you already have a large outstanding on your credit card, try and clear it out as soon as you can. More often than not, judicious use of your credit card can be the best way to enhance your credit score. If you miss single day on repayment date it gets recorded in your CIBIL scorecard.

Do not take too much of loan even if you have more capacity to repay

That fact that credit is readily available today is an undeniable fact, with lenders vying with each other to get customers into their fold. If you have a good CIBIL score of 750 or slightly above, chances are that you receive calls from relationship managers of banks who want to avail of a loan or a credit card almost every single day. But just because you are eligible for a card or a loan, does not mean that you should take one. For instance, if somebody is offering you a personal loan, do not avail of it for the sake of it and go on a family vacation with it! Credit should be availed of only when you require it and you are sure of your repayment capabilities.

Develop good credit behavior

Maintaining good credit behavior is a by-product of good financial habits. If you follow the above mentioned tips carefully and are careful with your finances, there is a slim chance of you going wrong with your CIBIL score. In fact following these tips are tried and tested ways to improve your credit score fast.

Do take your CIBIL score report atleast once in a year.

You can have your own CIBIL score card with nominal payment to CIBIL department(payment of Rs. 500/-) and you can get it within7 to 10 days. Do make it a practice to purchase your CIBIL score and CIBIL report at least once in a year, so that you do not get any surprises/Shock, by way of discrepancies in it, just when you are planning to take a loan.

Beware of sales team of loans : Login for loans by bankers

Some of the sales people from banks and NBFC push for login for loan and for which they take processing fees also. Login for loan also indicated in your CIBIL report, so when you give your processing fess cheque for processing loan proposal, ensure that you also get disbursement i.e. proceed for processing only when there are fair chance of proposal getting processed and disbursed. Too many rejections on your CIBIL score card may affect your credibility.

One needs to take into account that the improvement of scores is a slow process and shall take its own course. Thus it becomes important for one to keep checking the scores from time to time.

Hope this tips will help you to improvise or maintain your credit score.

Question: What is unacceptable credit score ? will my loan be rejected ? I will not be able to borrow in future ? What is range of CIBIL score, what is considered good score and what is considered red or bad score?

Generally any score less than 750 is unacceptable by the bankers and financial institutions for lending any further loans. It is also important to note that 750 is not rigid in certain cases, you can prove to your bank or institutions reason for delay in some payments, which will not happen in future.

Question: Why my CIBIL score decreased, How I can raise dispute for wrong CIBIL/credit score ?

You may not have made timely repayment of loan EMI or credit card bills. Some time you may find your score reduced abruptly you can apply by making request for raising dispute online and that can be done using this link https://www.cibil.com/dispute-resolution , it is generally resolved within 30days from date of application. CIBIL cannot make any changes in your credit report directly. The respective bank or financial institution should authorize CIBIL to make the changes.

Question: I have not taken any loan till date, my CIBIL score will be available?

IF you have not taken any loan or any credit card, you may not have any credit/CIBIL score.

Question: For how long data is kept for credit details?

As per the Credit Information Companies (Regulation) Act, 2005 governing Credit Information Companies, all accounts irrespective of their status (both Good Standing and Delinquent accounts) have to be maintained for a minimum period of 7 years from the date the account was last reported.

Also read related article: How to Pay Zero Tax for Income up to Rs 10 Lakhs by CA Chirag Chauhan

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