The establishment of CIBIL is an effort made by the Government of India and the Reserve Bank of India to improve the functionality and stability of the Indian financial system by containing NPAs while improving credit grantors’ portfolio quality.
“It is very important to understand that CIBIL is not a defaulters list. This is a very common misconception. CIBIL is an information repository of both positive and negative information about the borrower. This includes information pertaining to individuals who are making their payments on time as well as those who are in default” Mr Arun Thukral- Managing Director CIBIL said while talking with this newspaper.
Q1. Once CIBIL (Credit Information Bureau India Limited) added someone into defaulters list then he/she has been banned for life time or for specific period?
It is very important to understand that CIBIL is not a defaulters list. This is a very common misconception. CIBIL is an information repository of both positive and negative information about the borrower. This includes information pertaining to individuals who are making their payments on time as well as those who are in default.
CIBIL does not ban any borrower, neither does it provide any opinion, indication or comment pertaining to whether credit should or should not be granted. The credit grantors who have received an application for credit will make their own credit decision depending on their risk management policies.
Q2. What is the procedure to remove name from defaulters list?
As mentioned earlier CIBIL does not maintain any defaulters list. However, if a borrower is showing negative credit behaviour in the CIR, there are ways to improve his financial standing going forward which would be reflected in his credit history available with lenders on request –
• Always pay your dues on time. Late payments are viewed negatively by lenders
• 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
• 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. The more the number of credit cards with high utilization, the larger are the payments resulting from the high interest rate resulting in your ability to service additional debt obligations
• Apply for new credit in moderation. Your ‘Credit Hungry’ behaviour indicates your increasing debt burden
Q3. Where does CIBIL get the information from?
CIBIL collects and maintains records of an individual’s payments pertaining to loans and credit cards. These records are submitted to CIBIL by banks and other lenders, which are members of CIBIL, on a monthly basis. This information is then used to create Credit Information Reports (CIR) which are provided to lenders in order to help evaluate and approve loan applications.
Q4. Is there any individual credit rating possible if and what is the procedure?
Yes. This is called as a Credit Score and it is one of the most common tools for credit lending around the world. It is generated basis the individual’s credit history and is used to determine the specific level of risk associated with the individual.
In India, the CIBIL TransUnion Score is the only implemented generic scoring model, which through advanced analytics assigns a number between 300 and 900 to a borrower, based on his/her credit history. The higher the numerical value of the score, the lower is the risk profile of the individual.
The CIBIL TransUnion scoring model uses various attributes based on credit behaviour information for determining the credit score. And while many of them are proprietary in nature, the majority of the score is made up of the following elements:
• Credit Utilization: how much credit is this consumer using?
• Defaulting: how many accounts are past due – by how many days and by how much?
• Number of inquiries: has this consumer applied for additional credit lines?
• Trade Attributes: How old are this consumer’s lines of credit? What type of credit does he have? Does the consumer have a good mix of credit or is it all credit cards?
Q5. How can an individual consumer access his/her CIBIL Trans-Union Score?
Consumers can now access their CIBIL Trans-Union Score directly from CIBIL.
Consumers can purchase their CIBIL Trans-Union Score along with their CIBIL Credit Information Report (CIR) for Rs.450. The payment can be made by following an online payment procedure or through a Demand Draft. They will have to submit their own identity proof and address proof documents along with the application form and online payment receipt or Demand Draft. Further details on the CIBIL Trans-Union Score for consumers are available on the CIBIL website https://www.cibil.com/d2c
Q6. Individual corporate or non members of CIBIL could access the database of CIBIL?
Individuals and corporates can access their own Credit Information Reports (CIR) from CIBIL.
Credit institutions, which are members of CIBIL, can access credit reports of loan applicants for risk management. CIBIL works on the principle of reciprocity, which means that it will only share the information with its members who share their data with CIBIL, for credit risk management.