CIBIL’s journey had been short, but also interesting…
Before delving straight to CIBIL Score and its intricacies, it is important that we tell you more about CIBIL in India.
The Credit Information Bureau of India Limited aka CIBIL is the first of its kind in the country, incepted by the RBI and the Union Government; it entered with a bang in 2004. This was indeed a praiseworthy effort that could boost efficiency and perpetuity of the Indian economy by having some sort of control over NPAs (non-performing assets).
For a long time, CIBIL was the only player.
Did you know that over 13 organizations had applied to establish credit information bureaus?
Only three, namely, Equifax Credit Information Services Private Limited, Experian Credit Information Co. of India Private Limited, and High Mark Credit Information Services Private Limited have managed to gain RBI’s approval. And it took them 5 years to make it to the family of credit bureaus in India.
A Credit Score is assessed and calculated by all of the above approved credit bureaus, giving the lender a much-helpful peek into the credit history, credit worthiness and loan eligibility of an applicant.
Let’s check how banks assessed credit worthiness BEFORE and AFTER the entry of CIBIL.
Why CIBIL score matters:
A person’s Credit Score gives a financial institution an overall picture of his/her financial discipline and henceforth how likely they are to miss one or more instalments.
Banks take this number quite seriously, especially before giving out unsecured loans such as personal loans. But they also follow the same for secured mortgages such as vehicle loans and home loans.
In short, having a good score makes you the darling of all lenders and credit card providers. As mentioned above, CIBIL score is a crucial tool for lenders to gauge your loan repayment capacity when you apply for any kind of loan or credit card. CIBIL receives all your previous transactional information from the banks and follow an impartial algorithm system to estimate scores.
It is a crafty number game:
Let’s get into the number game now – the CIBIL score. Basically, it is a 3-digit number ranging from 300 to 900. Having a score of 700 and above is considered awesome and lenders will line up to give you loans and credit cards. But if it falls below that, be careful.
Still, a score between 625 and 700 doesn’t deserve to be judged harshly. There are many deciding factors at play here and not all of them might be your fault. And what is more, if your score is somewhere between 625 and 700, you can still boost CIBIL score by working on the weak points (based on your latest credit report). It will take a few weeks to reach there though. Low scores can be upgraded with the help of a professional too.
Acquire a hardcopy of your credit report and score and give it a once-over for any discrepancies that have brought down the number.
In case you find a divergence, do register a complaint to resolve it at the earliest. If there is one thing that can strike a major blow to your CIBIL score, it is the late/nonpayment of EMIs and dues. Pay them on time and you shouldn’t have any problems with your credit score. Drawing too much credit (more than 40 percent of your income) can also be a reason if your scores fall despite timely payments.