Understanding how CIBIL works, better

If you are one of those who still are unfamiliar with what or who CIBIL is, it’s time you do so with haste! India, like many other European countries and the USA, has been using a person’s credit score to determine if he/she is eligible to get any form of credit – loan or credit card. Many top corporations are including a credit check as a part of their background verification process. Insurance companies and mobile service providers are also in talks with SEBI, RBI and CIBIL to use these scores and credit history for their approval procedure. In short, a healthy credit score is something one MUST have in order to secure their finances and get them at good deals. And the primary organization in India that maintains and allocates these scores is CIBIL – the Credit Information Bureau (India) Ltd, also known as a Credit Information Company.

CIBIL credit scores are three digit numbers that may lie anywhere in the range of 300 to 900. The higher your score, the lesser financial risk you are in the eyes of lending institutions. Here are a few facts about CIBIL and how it operates for you to remember:

1. How does CIBIL provide the scores?

2. CIBIL is provided data by the banks and lending institutions which are its members. The data consists of details about the type of credit, size of it, the payment pattern, when accounts are opened or closed and when customers make enquiries about getting a credit. All these details are then analysed and accordingly a score is allocated to an individual. The scores and the client details are then sent in the form of a credit information report (CIR).

3. Are credit scores mandatory?

4. Yes, more and more institutions are registering with CIBIL and depend on the scores they generate along with the client application and forms to make a decision about providing a credit card even with a limit as low as INR 30,000. So, it’s not just how much you earn and the company you work in that makes a difference. Your credit score is also very important.

5. What do I do if my score is low?

6. Low scores result in complete cancellation of credit applications or approval but with not-so-favourable terms. If your score is less than 650, you have low chances of getting any form of credit. Some simple steps such as making payments on time, maintaining as small balances as possible on credit cards, watching the number of credit enquiries you make and keeping a tab on your credit score from time to time will certainly make a lot of difference to your score in a short time. For more complicated issues, there are several qualified credit score repair agencies whom you can contact.

CIBIL and many other organizations have conducted several awareness and informative campaigns to make everyone aware of their policies and the importance of having good scores. There are several reference materials you can get from your bank and online if you are interested in knowing more on this topic.