CIBIL In India And Why It Matters To You?

CIBIL, or the Credit Information Bureau (India) Limited, is a credit bureau: the first one in India licensed by the Reserve Bank of India.They collect credit-related information to issue credit scores and reports for organizations and individuals in the form of a Credit Information Report (CIR).

History of CIBIL in India

The Credit Information Bureau (India) Limited was founded in August of 2000 in Mumbai, Maharashtra. Here are a few of the key milestones of the CIBIL so far:

• 2000- following the recommendations of the RBI Siddiqui Committee, TransUnion CIBIL Limited was established,
• 2004- Credit Bureau’s services were launched in India (Consumer Bureau)
• 2006- Operations expanded to include commercial bureau
• 2007- CIBIL score India was introduced- The country’s first risk scoring model for financial institutions
• 2010- CIBIL Detect (India’s first high-risk activities information repository) and CIBIL Mortgage (The first centralized mortgages database) were launched
• 2011- CIBIL scores were made available for individuals
• 2016- TransUnion becomes TransUnion CIBIL and takes over 82% stake in CIBIL
• 2017- CIBIL launches MSME Rank to improve credit penetration in MSMEs in India. TransUnion increases stake in CIBIL to 92.1%

Importance of CIBIL in the Indian Economy

Since the inception of CIBIL, the loan market has changed drastically, with a sharp increase in purchasing power and the number of borrowers. The CIBIL has also improved financial literacy and provided incentive for people to maintain their credit scores and history. Nowadays, it’s easy to check CIBIL score online (read more at moneytap) and find out what will affect it.

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How CIBIL Works

TransUnion CIBIL take inputs from multiple banking and non-banking financial corporations and generate a CIBIL report with a credit score between 300 and 900. This score indicates a person or organization’s creditworthiness with a higher score indicating a lower risk for lenders.

What are the factors that impact a CIBIL Score? 

• Percentage of timely payments

Your repayment history can account for up to a third of your score. CIBIL assess the percentage of payments made on time as an indicator of reliability

• Number of negative marks

Foreclosures, accounts which are settled or written off as bad loans, and even extended delays in repayment reduce your CIBIL score

• Length of credit history

A longer credit history usually means a better score, as long as there are few negative marks.

• Number of hard enquiries

A hard enquiry is when a potential lender accesses your CIR. Having a high number of enquiries means you’ve applied a lot, which can reduce your score

What are the advantages of a good CIBIL score?

• Interest rates on loans may be lower for you
• Your credit cards may have better rewards and benefits
• Pre-approved loan offers are usually based on high credit scores
• You may be able to avail loans for longer tenures
• Credit card applications get approved faster
• More banks will be willing to offer loans, giving you the power to negotiate
• Loan processing fees and other credit-related charges may be lower
• You might get a higher credit limit for your credit card

How to improve your CIBIL score?

1. Check your CIBIL report regularly
   Learn how to know CIBIL score yourself and make sure each account on your CIBIL account is reported accurately. Raise a dispute for any errors immediately.
2. Set payment alerts and reminders
   It’s easy to miss out on payment dates, but you might pay a fine and reduce your credit score, so set reminders before your due date
3. Improve your credit utilization ratio
   Using more than 30% of your credit limit each month might be a red flag, so pre-paying some part before the due date may be better
4. Don’t apply for loans or cards too often or frequently
   Lenders will pull your CIR each time and that counts as a hard inquiry
5. Increase your credit age
   A good average age for credit history is around 5 years. Options include becoming an authorised user for someone else’s card and not closing existing accounts