CIBIL is the apex credit bureau of the country. CIBIL stands for Credit Information Bureau India Limited. CIBIL does the task of collating customer’s’ credit history and then evaluating customer’s’ credit score based on their credit history. Apart from the credit score, CIBIL also furnishes credit report for individuals and companies. These reports are the first point of reference for banks and lending institutions for checking the creditworthiness of any customer who seeks to apply for any kind of loan.
Credit report of any individual or company plays a huge role in determining loan eligibility and credit sanction process. However, in case there is a discrepancy in your credit report, then chances of obtaining credit can be ruined to a great extent. While maintaining a good credit history is in itself a challenge owing to small oversights in bill payment creating deep dents in credit reports, CIBIL is now further mulling to include utility bill payment history too.
How will CIBIL include payment history in credit report?
Before sanctioning loan to customers, banks check their credit report and history. Currently, this history includes only credit related repayments like loan and credit card payments. However, efforts are on to include not just loan and credit card bill payments but also phone bill payments, insurance premium payments and utility bills to calculate the creditworthiness of an individual. In order to expand the scope of credit history, Credit Information Companies are in talks with telecom operators as well as the election commission of India to obtain access to their database.
If everything goes on smoothly then in the near future CIBIL will have not just credit information but also postpaid bill payment history included in the credit reports. Most telecom companies in India are members of CIBIL and are using data, however, customer data is not being shared by these companies with CIBIL.
Current functioning of CICs in India
Currently, when information about an individual is sought by any user, it gets only information provided to the CIC by its member. This does not include non-member related credit history which the client would have had with the non-member. The move to include more customer data on payment history stems from recommendation by a committee set up by RBI. The committee led by HDFC Bank managing director noted that India ranks 28th in the list of “getting credit” by the World Bank.
Report by this committee pointed out that India has very low coverage by credit bureaus that cover just 19.8 per cent of adult population as against 100 per cent in various other countries. The report also noted that there is low penetration of financial services in the country and that credit information business in the country can still be improved to a great extent.
Quite recently. CIBIL was also roped in by the government to help track death insurance claims made by customers. With a huge database of customer information, CIBIL has become the apex organization to furnish data which can be used to study and track customer behavior, and to furnish insights that can be leveraged to ensure better credit information business.
How is credit history and credit score important?
The first thing that banks check upon before accepting your loan application is your credit history. CIBIL rates credit scores of individuals between the range of 300-900. Any score that is greater than 750 is considered ideal for obtaining credit. In short, your credit score and history are pointers to your repayment pattern. Since, non-performing loans are a huge liability for any lending organization, credit reports come across as convenient tools that lend insight into payment behavior of customers and thus, help banks reduce cases of loan default.
While credit scores above 750 are good and healthy, anything below this calls for trouble. Customers can check their credit scores before applying for credit with any bank. For customers who have poor credit scores, following are some of the steps that can help improve it.
- Timely payment of credit card and utility bills
- Minimize the number of credit channels availed. If required, get a loan to consolidate all your debt into one single channel
- Use credit cards wisely so as to avoid overspending which may result in delayed payments and an affected credit history
- Have a mix of secured and unsecured debt in your financial portfolio
- Get your credit report and check if all the information being displayed on it is correct and current
- Do not apply for credit with too many banks
CIBIL is just a collator of your credit information. It does not make changes to your credit history and as such the onus to improve your credit score lies in your own hands.