Banking News

How to read CIBIL’s credit information report?


CIBIL (Credit Information Bureau (India) Ltd.) is a repository of credit information of individuals, juristic persons and all other forms of business enterprises.     Primarily CIBIL gathers credit history of borrowers and credit card holders, database of which is updated month on month by its member banks and financial institutions in India.   Such information   contributed by members will be shared in the form of Credit Information Report (CIR) to its entire membership as and when they call for it.

What is a credit information report?

CIBIL’s Credit Information Report (CIR) is one of the useful tools for making credit decision by the lenders. Besides CIR of the borrower, the lender may call for CIR of all the partners, promoters, directors and guarantor to the loan. The CIBIL would supply individual credit information report on each person (including juristic person) in 5 sections which are as under.

  1. Credit scores: 3 digit scores awarded by CIBIL on the basis of accounts and enquiry
  2. Personal information/Identification details: PAN card, Passport, Driving License, voter id, aadhar card etc.
  3. Employment information: as reported by the lenders at the time of opening particular loan account/credit card account with them.
  4. Enquiry: section provide with the details regarding type of loan, size of the loan, date of the loan application etc.
  5. Account information: furnishes the details of existing loans and credit card facilities, name of the lender/s and date of opening each loan account, loan amount, current balance, over dues if any. This section also displays month on month record up to 36 months of repayments.

Meaning of three digit numeric score in the CIBIL report

The three digit numeric score which is known as CIBIL score can be equated to a credit rating of the borrower/guarantor. The scores are awarded by means of factoring on how the borrower has been servicing existing credit facility. The scores for Credit cards are calculated based on the utilization/payment history of primary credit card holder.

How the scores are arrived?

  1. Good repayment history without any delay and default                      maximum 315 points.
  2. Credit utilization (more points for lower utilization of limits)          maximum  270 points.
  3. Frequency of application for a new loan, credit card etc.                   maximum 135 points.(Recurrent applications have a negative bearing on credit score).
  4. Duration of debt servicing                                                                           maximum   90 points.(Prompt servicing debt for a longer period of time earns more points).
  5. Proper Mix of secured and unsecured loans                                           maximum 90 points.(Higher percentage of secured advance is likely to score higher points)

TOTAL                    Maximum  900 points

The Score closer to maximum 900 points reflects the good repayment track record of the borrower. Normally, the score in the range of above 750 points is considered as a good credit history and borrower’s future credit request may be considered favourably by the lenders. The score ‘NA’ or ‘NH’ in the CIR means that the person to whom the report relates does not have credit history /credit exposure in the past few years.

Latest directives of RBI:

Besides CIBIL, henceforth Credit Institutions are mandated to become members of all the CICs

In terms of Section 15 of the Credit Information Companies (Regulation) Act, 2005(CICRA), every credit institution shall become member of at least one Credit Information Company.  Normally to adhere the above regulation most of the  Banks and Financial institutions become member of CIBIL to seek CIR of borrower entity, all the partners, promoters, directors and guarantor to the loan for the purpose of making credit decision.

The problems of credit institutions in the existing system of CIR:

At present in India, there are 4 domestic Credit Information Companies (CICs) who have been granted certificate of registration by RBI viz.

  1. Credit Information Bureau (India) Limited (CIBIL).
  2. Equifax Credit Information Services Private Limited
  3. Experian Credit Information Company of India Private Ltd.
  4. CRIF High Mark Credit Information Services Private Ltd.

Under the provisions of Section 17 of CICRA, every CIC seeks and obtains credit information only from its member banks and financial institutions. Such information   contributed by members will be shared in the form of Credit Information Report (CIR) to its membership as and when they call for it. The problem of credit institutions is that they get a credit information report which does not include credit history related to those non-member Credit Institutions with which the borrower/client might have/had a current or a past exposure.

RBI source said that the bank has examined the pros and cons of certain possible alternative to overcome this problem of incomplete/inaccurate information along with suggestions/comments obtained from IBA and CIC. It is learnt, the regulator has come to the conclusion that the best option would be to mandate all banks and financial institutions to become members of all the CICs and moderate the membership and annual fees suitably. RBI further said that the instruction in this respect would be reviewed soon. In addition to scheduled banks, all Co-Operative banks are advised to comply with its directives of January 15, 2015 and become members of all CICs and submit data (including historical data) to them.

(Source: On the basis of seminar on CIBIL attended by   the author, RBI communique and news items appearing in the media on the subject)

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