TransUnion CIBIL (Credit Information Bureau India Limited) is India's leading
credit information company with one of the largest collections of consumer
information. It was established in 2000.
Background of Credit Score in India
The advantages of the Credit Information Bureau of India are to:
- In India, the RBI has licenced four companies to access and manage credit
information. CIBIL started its activities as in the year 2001, and has since
been one of the most popular credit information companies in the country.
Others include Equifax, Experian and High Mark. Each of these organisations
have their own unique scoring systems.
However, one thing that is common between all scores is that if you have no
credit history, your score will be:
- 1 and if you have credit history that is more than 6 months old, you
will receive a credit rating of 0. Apart from this, these credit information
companies also provide an in-depth credit report. In fact, your credit
report is the basis on which you are given a credit score.
- In today's world, consumers turn to credit cards and loans to help them
achieve their dreams and financial goals. The CIBIL Score is one of the
important factors and
- CIBIL Score
A consumer's credit score is known as a CIBIL Score. Simply explained, a credit
score is a three-digit numerical summary of a person's credit history and a
representation of their credit profile. This is based on previous credit
behaviour, such as borrowing and repayment practises, as reported to CIBIL on a
regular basis by banks and lenders (details of which may be seen in the
consumer's CIBIL Report).
- CIBIL Report
- A CIBIL Report is a consolidated credit report that comprises the
consumer's CIBIL Score and credit summary, as well as personal information,
contact information, job data, and loan account data. It's worth noting that
lenders look at both the CIBIL Score and Report when determining a person's
- Help in expediting the sanctioning of credit and investment decisions by
banks and financial institutions.
- To curb the accretion of fresh NPAs.
- To this effect, CIBIL makes use of the technology driven system ensuring
speedy processing, constant and periodic updating and the availability of
error–free data at all times to its members.
- To maintain a central database of credit related information and then
make this information available to members online on their demand. CIBIL
provides positive as well as negative, comprehensive, error-free, borrower-wise
and bank-wise credit related information based on.
Advantages of a High CIBIL score:
Disadvantages of Having A Bad CIBIL Score
- Lower Interest Rates on Loans:
All lenders in the country have started pricing loans according to the risk
profile of the applicants. And this has ensured that the creditworthy or those
with high credit score get lower rates of interest. Bank of Baroda, SBI, UCO and
Syndicate Bank are some of the banks which allow lower rates of interest for
their home loans for those with a high credit score.
- Quicker Approval on Loan/Credit Cards:
A high CIBIL score is an indicator of your creditworthiness, and this allows
your lender to make decisions regarding your credit applications at a faster
pace. In the absence of a good credit score, lenders have to consider many other
factors to determine your creditworthiness which might delay your loan.
- Better Negotiation Power with your Lenders
All lenders look at lending to good and responsible customers who will pay back
their loans promptly. If you are a customer with a high CIBIL score, you would
make for a desirable borrower.
This might give you an edge over other customers and in the bargain, you could
negotiate with the lender for a better interest rate or lower processing fee.
- Improved Chances of Higher Limits on Loans:
Higher amount of loans means increased risk for the lenders. Lending to the
individuals who are not responsible enough with credit multiplies the risk.
Hence, even if a loan is approved to an individual with low credit score, the
quantum of the loan approved may be much smaller than what they applied for.
- Easier to Get Higher Limits on your Credit Card:
A higher limit on your credit card can open a lot of possibilities. It goes from
a higher power of spending, a buffer in case of emergency or even a lower credit
utilisation ratio (Amount spent on your card/Total Credit Limit). Lower credit
utilisation is in turn necessary for having a good credit score. Higher limits
on a credit card are generally decided based on your credit score, responsible
behaviour with the credit card and your income. With a high credit score, you
make it easier for your card issuer to increase your credit limit.
- Increased opportunities to get Pre-Approved Loans from Banks:
A bank's pre-approved loan is a terrific approach to receive a rapid personal
loan from them. These loans, however, are not available to all customers. Before
issuing a pre-approved offer, a lot of inspection in the form of a solid credit
score threshold and your account balances takes place.
If you have a good credit score, then you might have higher chances of getting a
pre-approved loan from your bank or credit card.
Payment history, credit inquiries, limited credit history, many unsecured loans,
and other indicators are used to establish an entity's creditworthiness. The
CIBIL score is a rating given by the Credit Information Bureau of India (CIBIL).
This is a three-digit number between 300 and 900; the closer it is to 900, the
more creditworthy it is. A score of above 750 is regarded excellent and brings
several benefits. A low CIBIL score, on the other hand, might result in a slew
of drawbacks, including:
Loan Or Credit Card Rejection:Creditors, such as banks, do not want to accept risks beyond a certain point,
thus they avoid lending money or granting credit cards to people or firms with a
low CIBIL score. As a result, one of the most significant disadvantages of a low
CIBIL score is the high likelihood of loan or credit card application denial.
High-Interest Rates:A poor credit score shows the creditor's capacity and willingness to repay the
debt. As a result, banks and financial institutions are reluctant of authorising
loans or giving credit cards in such circumstances, as it entails a larger risk.
This, in turn, is repaid by the debtor in the form of increased interest rates.
Conditional Availability Of Utility Services:Another significant drawback of a low CIBIL score is the upfront security that
may be required to get essential utility services such as power, phone, and so
on. This is due to the fact that a low credit score indicates a riskier lender.
As a result, even if you have a strong payment history, the corporations will
need a security deposit.
High Insurance Premiums:Insurance companies feel there is an inverse relationship between a poor CIBIL
score and the number of claims submitted. The lower the CIBIL, the higher the
claim ratio. As a result, insurance companies usually demand a higher premium to
cover firms with a low CIBIL score.
Entrepreneurs with a bad credit score will face loan rejections, which may
completely jeopardize the high potential, new business plans.
Because landlords frequently do a creditworthiness check before renting out a
property, a person with a low CIBIL score may have a lot of trouble renting a
property. In the event of a very low score, the renters may be required to pay a
large security deposit to offset the risks of a poor score.
Overall, one must maintain a good CIBIL score by following simple steps such
as borrowing only when needed, avoiding delayed payments, consistently maintain
healthy credit, as well as always monitoring credit score.
A credit bureau or credit information company is CIBIL (Credit Information
Bureau India Limited). This firm is in charge of keeping track of all
credit-related activity, including credit cards and loans, for both businesses
and people. CIBIL receives information from registered member banks and a number
of other financial institutions on a regular basis. CIBIL generates a CIR
(Credit Information Report) and a credit score based on the information and
records given by these institutions.
CIBIL is a credit information database and does partake in any kind of lending
decisions. It provides data to the banks and such other lenders for quickly and
efficiently filter the loan applications which they receive in the course of