What is a CIBIL / Credit Score. Learn more about how it impacts your ability to borrow
Credit Information Bureau India Ltd or CIBIL is India’s first credit information bureau. It is a repository of information which contains the credit history of commercial and individual consumer borrowers. CIBIL provides this information to its members in the form of Credit Information Reports (CIR). As on March 2012, CIBIL has an information base of 250 million consumer trades, and 8 million commercial trades, and continues to grow at a fast pace sharing credit information with its 175 member base on the principle of reciprocity.
The idea behind setting up CIBIL is to gather all existing consumer and commercial credit information and pool it in a one point source for reference. Individuals or commercial establishments could have accounts in several banks and credit from different lending institutions. All such data can be pulled out for a quick reference check on the individual or commercial establishment, seeking loans, to be aware of the repayment track record of the loan seeker and quickly decide on loan eligibility.
CIBIL acts as a weeding mechanism, that helps identify poor repayment track records. It helps protect future lenders from giving credit to people and establishments who are unlikely to repay what is lent. Banks provide a lower interest rate for sound credit profiles and the CIR can work to your advantage. It also helps lenders and Banks quickly process a loan, without wasting valuable time on research and background check of the loan applicant.
It is a mistaken notion that only defaulter names are reported to CIBIL. Every member reports data on a monthly basis to CIBIL, of all its borrowers, for both defaulters and those repaying on time. The information in this database is also used to compute a credit score, which provides a good indicator to future lenders of a person’s probability of repaying a new loan. Some of the factors that influence the credit score and thereby a person’s ability to borrow in the future are:
Late payments / missed payments
Large number of credit cards or loans in proportion to declared income
Utilization of the allocated credit limit
High percentage of unsecured credit
Duration of credit history
Too many loan applications in a short time span
Settlement of loans in the past or past defaults
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