TransUnion Credit Information Bureau (India) Limited known as CIBIL is the first credit information company in India. The primary function of CIBIL is to collect and maintain monthly credit information reports (CIR) from banks and financial institutions. These reports contain information regarding an individual’s payment track record.
On the basis of the information contained in the CIR, CIBIL generates a three-digit score called a Credit Score, popularly known as CIBIL Score. In other words, the CIBIL Score is a summary of the credit history of an individual. This score indicates the probability of default by an individual borrower on the basis of the credit history. The value of CIBIL Score ranges from 300 to 900.
Normally, CIBIL employs an algorithm to calculate the credit score of an individual. Three key factors that affect the CIBIL Score as follows:
• Utilization of credit by the individual
• Any defaults/delays by the individual in servicing existing debt (whether EMI payments or credit card payments).
• The various trade attributes of an individual such as what type of credit is a consumer using, does the consumer have a good balance of credit and how old are the lines of credit
While calculating CIBIL Score, 30% weightage is given to the past performance of the individual in relation to servicing various debt obligations. As CIBIL Score is an assessment of the credit history and financial discipline of the borrower, previous records of debt service obligations are crucial. 25% weightage is accounted to the type of loan which has been availed – i.e., whether it is a secured loan or an unsecured one, what is the duration of such loan etc. Another 25% is attributed to the total credit exposure of the individual. Finally, the remaining 20% is attributed to factors such as credit utilization, recent credit behaviour etc.
How does CIBIL Score determine credibility of an individual?
As soon as you approach a bank or a financial institution for a loan, the first thing that the lender takes into consideration is the CIBIL Score. A CIBIL score of 750 or above increases the chances of the loan application being approved whereas a low CIBIL Score can result in the rejection of application.
A higher CIBIL Score gives the lender the confidence that the borrower is credit-worthy. The lender is also likely to offer such a borrower more favourable terms and conditions such as a lower rate of interest, reduced amount of EMI and waiver of other charges.
CIBIL gives you the option of purchasing a detailed CIR and your CIBIL score from its website. The individual desirous of getting the score needs to fill in basic details such as personal information, contact information and verify identity by providing the details of either your PAN card, driving license or passport etc.
CIBIL gives you the option to purchase the CIR and the CIBIL Score through a host of subscription plans. You have the option of choosing between 1 month, 6 months or 12 months’ plan. Upon subscription, you can access the CIR and CIBIL score as often as you need, received customized loan offers as per your credit score and improve your credit health with personalized score analysis.