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Established in 2000, the Credit Information Bureau India Limited (CIBIL) is responsible for maintaining the credit information of every individual of the country.
There are several banks and financial institutions around the country that are part of CIBIL. They provide credit data for every individual to the institution and in return, CIBIL creates timely reports to track their financial activities.
The main function of CIBIL is to provide credit reports to financial institutions and individuals. The credit report helps to understand the financial behaviour of an individual so that companies can study it while sanctioning a loan or a credit card.
Since credit reports play such an important part in the financial sector, it is important to be well informed on the subject. So, without further ado, let us jump straight to the heart of the matter.
CIBIL tracks the financial data of every individual and company that is registered under the organisation. With accurate collected data, it prepares a credit information report, commonly known as CIR.
This credit report contains important financial information of a person that can be viewed by different financial institutions, in case the person applies for a loan or a credit card.
The credit report contains information about previous loans such as car loans, personal loans, home loans, etc. It also contains all the information about your credit cards and overdraft facilities.
It has a detailed section observing one’s repayment history and how prompt they are with making payments for their EMIs.
This is all done to determine if they are capable of taking more loans and if they can handle repayment for any more credit cards. This is also how CIBIL determines the credit score of an individual.
Credit score ranges between 300 to 900 and a person with a credit score of 750 or more is capable of getting a loan. Banks and other financial institutions have the right to refuse to sanction a loan or a credit card if a person has a credit score of less than 750.
Also, CIBIL has no right to force an institution to sanction a loan, even if a person has a good credit score. It is solely in the institution’s hands.
Now that we know what CIBIL reports contain, we can move on to understand its importance in the financial sector. Today, a credit report has become a very essential part before making any big investment and for creating a bond between an institution and an individual.
This is because it provides written proof of the individual’s financial history and the financial institution finds it extremely easy to trust them. Other than helping banks and other financial institutions understand the financial worth of a person, it also gives the individual financial support, in case he or she requires immediate money. A good credit score and a clean CIR gives them a higher chance of obtaining a loan or a credit card.
Moving on, the third advantage of a credit report is that it helps in maintaining financial discipline among individuals. The CIR gives a complete record of different loans, whether they are credit loans or some other kind of loan.
This helps them understand their financial habits and they can work on improving their credit score. This stops the person from falling into the trap of extensive loans and financial burdens.
If a person has a good credit score, then he or she has the right to negotiate with a bank or financial institution to ease interest rates. Many people think that only a highly stabilised enterprise can negotiate with interest rates, but that’s not the case.
Every individual with a good income, a good credit score, and a clean credit information report has the right to negotiate interest rates with the bank.
Realising the importance of a CIBIL report, it is very important to know how to read one. A CIBIL report is a piece of various collected information that is efficiently compiled to help the reader understand it easily. There are six main sections of a CIBIL report; CIBIL scores, personal information, contact information, employment information, account information, and inquiry information.
These six sections have different roles and are equally important. Their purpose is to give complete and genuine information of the client to the bank or the financial institution to build a trustful relationship. Here is a brief on the importance and use of every section: