Credit Information Bureau India Limited

Description

Learn what is CIBIL from this CIBIL Explained Simply Guide

If you’ve ever applied for a loan or credit card in India, you’ve probably heard about a ‘CIBIL score.’ But what on earth is CIBIL and why is it so important? This article will help you understand exactly what is CIBIL i.e. Credit Information Bureau India Limited, what it does and most importantly why this is relevant in your life regarding finance.

What is CIBIL?

Know more on CIBIL – Credit Information Bureau India Limited, known as India’s maiden credit information company set up in the year 2000 that monitors and keeps records of every individual’s or company’s credit activities in terms of loans or credit cards. This gradually turned out to be one of the most reliable sources for credit information in India. Presently, it is referred to as TransUnion CIBIL since it has been acquired by the worldwide TransUnion group.

What Does CIBIL Do?

CIBIL’s main job is to maintain a repository of credit information in India on individuals as well as on businesses related to:

• Different types of loans (home, auto, personal, etc.)
• Card privileges
• Mode and details of repayments
• Unresolved liabilities
• Credit defaults
• Number of days over the due date

This information is sent by banks or other lending institutions to CIBIL at regular intervals. The latter processes this information for arriving at credit reports and credit scores of individuals as well as companies.

What is a CIBIL Score?

A CIBIL score is a three-digit number between generally 300 and 900, which reveals the extent of how poor or good one’s credit history is. The higher the score, the healthier one’s credit health. Most banks and lenders would want to lend to someone with a CIBIL score above 750 since it indicates that you are likely to duly pay your debts on time.

How is your CIBIL Score Calculated?

CIBIL scores are derived from your scorecard on several heads of consideration including but not limited to: your payment history; whether you have been paying your EMIs and credit card bills on time or not; credit utilization-how much of the available credit has been utilized because this also matters and crossing the line here can prove costly for you; length of using credit favorably-the longer you have been using credit responsibly, the better; type of credits, whether they are mixed or saturated with one kind of loan, i.e. all secured or unsecured. Only apply for so many loans or credit cards in so little time. Otherwise, it’ll ding your score.

What Makes CIBIL Important?

CIBIL has significant importance in the entire process of lending in India. Prior to sanctioning any kind of loan or credit card, the CIBIL report and score of an individual is analyzed by the banks/financial institutions to justify the degree of risk associated with lending money to him. For high score holders, they have a better chance of having fast approvals, attractive interest rates and high credit limits. Failing this brings about rejections or maybe one may be charged high interests.

You can check your CIBIL score online on the CIBIL website after furnishing them with some basic personal particulars like PAN number and date of birth. Every person is eligible for one free CIBIL report in 12 months. Regularly checking one’s score is a very good habit; it helps one notice mistakes and understand one’s credit health.

How to Keep a Good CIBIL Score

Pay all EMIs and credit card dues on or before the due date, don’t exhaust too much of your credit limit, ideally try to keep your credit utilization at 30-40%, avoid applying for several loans or cards at one time, keep the old credit accounts open because a longer history of credit is beneficial. Check your CIBIL report for any mistakes and if there are any errors report this to CIBIL urgently.

CIBIL for Businesses

CIBIL does not only trace single credit. It also maintains a track of business entities’ credit reports and scores. Lenders use these in determining if to provide business loans or credit lines.

Now Why Should You Give A Damn About Your CIBIL Score?

Your CIBIL score impacts your future and is huge-financially. It impacts your ability to borrow for a home, buying a car, starting a business, and even getting a new credit card. Good meaning-more options and better deals. Poor meaning-it can really hold you back.

Conclusion

CIBIL, or Credit Information Bureau India Limited, is considered an integral participant within India’s financial system through the maintenance and recording of careful credit activity conducted by the individuals. In such cases, the main role of CIBIL is to arm the lenders with relevant information, which in turn helps them to make rational decisions regarding their money alongside encouraging well management from the side of the borrowers. If you are planning on getting a loan in the near future or just want to keep your options open, one of the best things you can do for yourself financially is keep a close watch on your CIBIL score.