Cibil makes credit scores available to individuals

21-Apr-2011

Source : The Economic Times

Credit Information Bureau (India) Limited (Cibil), the agency gathering data on credit histories of individuals, has now made credit scores available to individuals for a fee of Rs 450 per request. An individual’s credit score would be a three-digit numeric summary of his credit history for the last three years, and this would be rated on a scale of 300-900.
The higher an individual’s score, the better would be his chances of securing a loan. Banks have, for the last two years, used this data as an important factor in deciding on whether to approve or reject a loan.

In August 2009, Cibil had made credit information reports available to individuals for a fee of Rs 142. “The response was huge and these customers started requesting for their credit scores too. Hence, we decided to make the score available to them,” said Cibil Managing Director, Arun Thukral. The format of the report was revised this month and the reports would now also show whether nor nor the data provided by banks is accurate.
Through Cibil’s website, individuals can request for their credit scores online. They can also make the payments online, after which, they would have to send proofs of their identity to Cibil. The score, along with the report, would be delivered to them in seven-ten days. “We are working towards an online authentication system. Once this is done, it would help in delivering scores and reports online,” Thukral said.
Making credit scores available to borrowers can also be seen as a step towards risk-based pricing, a trend not practiced by retail borrowers in India. Risk-based pricing essentially means the interest rate on a loan is also determined by the lender’s estimate on whether or not the borrower would default on the loan.
“Banks might consider such an approach only in a scenario of intense competition. Presently, barring a few, not many banks are aggressive on retail loans. This may happen, but will take at least two years,” said Sanjay Agarwal, senior vice-president and group head (retail strategy and branding), ARCIL.
Credit scores give banks an estimate of an individual’s ability to repay a loan, since they are based on parameters like the loan amount, the nature of the loan, payment frequency and prior delinquency. Cibil research shows 58 per cent of individuals with credit scores of 800 or above were able to secure loans in 2010.

Seven rules to improve your Cibil CIR

31-Mar-2011

Source : Economic Times

By Harshala Chandorkar, Senior Vice President Cibil


Your Credit Information Bureau (Cibil) credit information report (CIR), other than your income, is the single most important tool used by a lender to evaluate your application for any loan or credit card application.
Naturally, it’s important that you understand your Cibil CIR and what it takes to maintain a credit history, so that it is viewed favourably by lenders .
A good credit history can be maintained by following these seven simple rules:
RULE 1
Always pay your bills on time. Late payments are viewed negatively by lenders and may affect the chances of your loan getting approved. In addition, if you do not make payments on loans for more than 180 days, the lender may "Write Off " the amount in question. The lender then proceeds to report this on your Cibil CIR. Moreover, in the event that you make a payment which is less than the amount the lender believes it is owed, the lender will report this as ’settled’ to Cibil.
For example, if the lender tells you that you owe it Rs 100 but you pay only Rs 80 to the lender, it will then report your account as ’settled’ to Cibil. Both ’write off ’ and ’settled’ accounts may be viewed negatively by lenders while evaluating your loan application because this status implies that you haven’t been able to adequately repay your lender.
RULE 2
Keep your balances low. Most lenders review the total outstanding debt of a potential borrower (across all types of accounts ) and the amount of debt used in proportion to the amount of debt sanctioned to the borrower by the lender. While the balances on your loans will only reduce over time as payments are made, you must be diligent about controlling your credit card utilisation.
For example, if your "Current Balance" is Rs 90,000 with a "High Credit" of Rs 1,00,000, this may be viewed negatively by a lender. While it is always prudent to not use too much credit, if you are already approaching the boundaries of your existing sanctioned amounts and credit limits the lender may be reluctant to provide additional loans to you.
RULE 3
Maintain a healthy mix of credit. Your Cibil CIR should contain a mix of a home loan, auto loan and a couple of credit cards. A high number of just credit cards may affect the chances of a loan approval. You may wonder why. Although a credit card offers easy access to finance, it’s also by far the most expensive form of credit.
The more the number of credit cards with high utilisation, the larger are the payments resulting from the high interest rate charged on credit cards. This may affect your ability to service additional debt obligations.
RULE 4
Apply for new credit in moderation. If you have made many applications for loans, or have recently been sanctioned new credit facilities, a lender is likely to view your application with caution.
This ’credit hungry’ behaviour indicates your debt burden is likely to, or has, increased and you are less capable of honouring any additional debt.
RULE 5
Think twice before closing credit card accounts. While using credit cards may negatively impact your Cibil CIR, unused credit cards actually imply that you are financially secure.
This makes lenders view your application more favourably.
RULE 6
Monitor your co-signed and joint accounts monthly. In cosigned or jointly held accounts, you are held equally liable for missed payments.
This is extremely important because your joint holder’s negligence could affect your ability to access credit when you need it.
RULE 7
Review your Cibil CIR frequently throughout the year. Unpleasant surprises in the form of rejected loan applications can be avoided by ensuring that your Cibil CIR accurately reflects your current financial status. So reviewing your Cibil CIR 3-4 times each year is important in order to keep you financial health in good stead.
Though these general rules are important to keep in mind, each lender has its own policies to sanction a loan to an applicant