How to Improve Your CIBIL Score- Relevance of CIBIL in the Indian Economy

An effective database is of immense help in the advancement of our present-day society. Database refers to a set of information which is stored and made available to either the public or some specified set of persons.

It may constitute an odious task to maintain a general database on all sectors of the society. This has led to the creation of various sectors specific databases. With the topic at hand, this discussion shall centre on the creation and maintenance of database in the financial sector in India.

Sometime in the year 2000, the government in India made a bold attempt at creating and sustaining an effective database in the financial sector. The outcome of this bold attempt is the creation of CIBIL.

CIBIL stands for Credit Information Bureau (India) Limited and may also be called the TransUnion CIBIL Limited. This is the first “formal” database in the India financial sector. Amongst the mandate given to CIBIL when it was created is to gather, maintains, and make available to recognized persons the credit-related information of private persons and Corporate organizations.

Having given the above insight on the topic of discussion we are constrained to further discuss this topic by highlighting the following:

1. The Operation of CIBIL in India,
2. The Registration procedure of CIBIL (companies and Private person),
3. The Relevance of CIBIL in the India Economy, and
4. In line with the topic of this study emphasize on how a person or corporate body can improve their CIBIL score

The Operation of CIBIL in India

In accordance with responsibility given to it when it was established, TransUnion CIBIL on a monthly basis gathers data from financial institutions. The data gathered from financial institutions by CIBIL or the TransUnion CIBIL is with respect to a person or company’s loans and payments made by credit cards.

Relying on the information gathered by CIBIL a person’s credit record is created and maintained by CIBIL. The credit record is usually assessed and a grade is given. This credit record of a person is usually resorted to by lenders in order to decide whether or not to advance loan to the person or corporate body.

In other words, lenders apply to CIBIL and obtain a person’s credit record, the credit record will be evaluated by the lender after which they will decide especially on the strength of the record whether or not to advance loan to such person.

The CIBIL assessment is not what should be taken lightly in India. It is obvious that the financial record and the grade ascribed to the CIBIL reports play a major role in the financial advancement of a person, corporate body and the society at large.

The impact of CIBIL assessment and the score could be better understood in the sense that financial institutions are inclined to grant a larger credit facility to a person with a good CIBIL grade. Again with a good CIBIL grade, an application for a loan will most likely be granted to an applicant with a very low-interest rate.

The Registration procedure of CIBIL (Companies and Private Persons)

It is important to state again that there is a need for both a private person and a corporate body to register under CIBIL. This part of the discussion is intended to enumerate and briefly state the registration procedure under CIBIL for both corporate bodies and private persons.

CIBIL Registration for Private Persons

1.     Log on to www.cibil.com/creditscore, and you will be directed to the credit score section of the CIBIL website.

2.     Choose a subscription and provide the following information like Permanent Account Number (PAN), valid email address, date of birth and gender.

3.     With the available payment platforms like net banking, credit card, debit card or cash card make payment for the subscription.

4.     Questions will be asked pertaining to your loans and credit cards. Then CIBIL will request for more details on your transaction from the mentioned financial institutions.

5.     The feedback from these financial institutions will comprise the financial record. The financial record will be authenticated and graded after which it will be emailed by CIBIL to the email address provided at the point of registration in paragraph (b) above.

CIBIL Registration Steps for Companies

Though similar with the procedure for private persons as discussed above. The procedure for CIBIL registration by corporate bodies in India are as follows:

1. Log onto www.cibil.com/online/company-credit-report.do which the official website of CIBIL for its report on companies.
2. Provide the following information which will be required: Company Name, the constitution of the Company, the registered address of the company, company email address, and any other information which may be required.
3. With the various payment platforms such as credit card, debit card, cash or net banking, payment the sum of 3,000 Indian Rupees.
4. A Registration ID and Transaction ID (username) sent via the email address on the completion of payment.
5. A know your customer (KYC) document(s) i.e a drivers license, national identity card, international passport etcetera will be required to be uploaded.
6. After which CIBIL financial record and rank will be delivered at the earliest opportunity to the applicant company.

The Relevance of CIBIL in the Indian Economy

The tremendous increase and competitive transaction records in the loan market of India are due to the introduction of CIBIL. CIBIL has played a major role to ensure that not only the increase in the number of clients but also in their purchasing power in the financial sector of India.

The current financial literacy and culture among the citizens are due to the commendable input of CIBIL which has compelled people to maintain a good credit rating in their financial record.

The practice of making available the CIBIL records of persons or company’s seeking loans to the lender has created stability in the loan and credit market of India. The reason for this stability is not far fetched as lenders now have an evaluated financial record of the person or corporate body seeking loan which will be further evaluated. From their final evaluation loans can be granted to the applicant on the strength of the CIBIL record and score.

How to Improve on CIBIL Score

The danger of having a low CIBIL score is that lenders will not be easily swayed to grant loans to such person or company with a low financial record. It is therefore important that in addition to our earlier discussions above to highlight the various ways of attaining commendable CIBIL scores.

1. One of the numerous ways of attaining and equally sustaining a good grade in CIBIL assessment is by paying up loans within the stipulated time frame. Though failure to pay up loans may be due to an oversight, and such will obviously throw the person with such a record in a bad light while seeking another loan.
   1. In addition to paying any stipulated penalty for delay in paying off loans, the score of the debtor will decrease in the CIBIL assessment. The drop in the CIBIL score of such person or company will discourage lenders from further lending him money.
   2. It is important that persons who are not good at committing things to memory should endeavour to set a reminder to pay their loans.
2. It is said that mistakes are always. While you may have a clean loan record, due to some lapses in the administration your record may still show that you have an unpaid loan. It follows therefore that on the receipt of credit records and assessment from CIBIL, such records should be properly scrutinized.
   1. The essence of the scrutiny on the part of the recipient is to ensure that the record does not contain any error which will most likely affect him adversely to see if there is an error in it. Where an error or suspicious activity is observed it must be promptly referred to CIBIL for correction.
3. It is a healthy financial practice to have mixed or balanced loans example given is unsecured loans such as credit cards, personal loans and secured loans such as car loan, home loan or mortgage. Taking any form of loan in excess will definitely leave a negative impact on the CIBIL score of an individual or a company.
4. Akin to paying up loans timeously is the practice of cleaning the credit cards. This will undoubtedly give a positive impression to the lender about the person or company seeking a loan.
5. The benefits of having a joint account are enormous. But in this scenario, it is important to avoid having a joint account because any default emanating from the other joint holder of the account will extend to the person or company. This will in great measure reduce the CIBIL score of the innocent joint account holder.
6. Similar to holding a joint account is standing as a guarantor of loans because in the event of a breach the default from the other party will also be reflected on the CIBIL record and score of the guarantor.
7. Banks such as ICICI Bank limited Axis bank etcetera grants secured credit cards. If you use and repay credits from such secured credit cards by these popular banks the CIBIL ranking of such person will increase greatly.
8. Multiple loans may seem to be attractive but clearly, they are not so. When one takes multiple loans he creates the impression that there is insufficient fund to the credit of the borrower to pay them up. But where loans are taken gradually and repaid on time it boosts the CIBIL ranking of the borrower.
9. While seeking for loans it is believed that long term loans are the best. With the long term for repayment, the borrower enjoys ample time to pay within the stipulated term of the loan.
10. In order to gain a greater CIBIL score, it is advisable to increase the credit limit of your card. You can either make the request for the increase in the credit limit or the bank makes such an offer. With a lot of credit limit and a minimal expenditure on your part, the CIBIL score will increase.
11. The continued use of an old credit card record which has commendable repayment record boosts the CIBIL score of a borrower instead of phasing out the old credit card.
12. If you are not in default of credit card bills, CIBIL will consider this as a positive attitude towards loan especially where you intend to purchase an expensive commodity like a vehicle or a house.

Conclusion

The introduction of CIBIL did not only create a database for the financial records of persons and corporate bodies. In fact, CIBIL is a self-assessment platform for persons and corporate entities intending to solicit for a loan from lenders.

Either from the self-assessment or the independent assessment from the CIBIL score the lender and the borrower are well informed the possible amount of money which should be loaned to a borrower.

The sanity created by CIBIL in the financial sector may be generally acceptable and must have been the secret behind the growth in the economy of India.

However, it is pertinent to observe that there are millions of great business ideas which were not funded or adequately funded because of the low CIBIL score of the borrower seeking for the fund.

It is important to state that whilst the borrower was unable to diligently build a positive CIBIL score and record such should not be perpetually held against him because it may lead to the decline in innovation and business idea