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How to read your CIBIL report?

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.

What Is a CIBIL Report?

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.

What Is a CIBIL Report?

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.

How to Analyse the CIBIL Report?

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:

  • CIBIL Score : The CIBIL credit score is the overall study of one’s credit report, and how worthy he or she is of getting a loan or a credit card. As already explained above, it is a score between 300 and 900 that gives the brief of a person’s financial behaviour. A good credit score is one above 750. A score above that increases the chances of an individual or a company getting a loan and negotiating their rate of interest.
  • Personal Information : It is a common misunderstanding to think that personal information is not related to financial information. But, personal information collected by CIBIL is proof of accurate and genuine information. It helps banks and financial institutions verify the client’s data with the provided one. Personal information consists of PAN card details, name, date of birth, voter’s ID, and other identification proofs. The information is collected through various means. The data collected from previous loan lenders is marked with an ‘e’ to prove its accuracy.
  • Contact Information : Contact information forms the third column of the CIBIL report that occupies all the contact information of the person. This is another proof of the genuine identity of an individual. The contact information consists of various addresses and contact information to give all the possible contact services used by the client. Contact information covered in contact information column addresses (home, work, temporary and permanent), email IDs, contact numbers (mobile and home). The information is provided by the previous and current lenders to ensure accuracy.
  • Employment Information : Employment information contains the data of all the jobs and companies a person has worked in. They check their records at those companies, and how frequently they have switched from one workplace to the other. This helps the lender understand the income pattern of the client. Anyone who skips too frequently between jobs has a low chance of getting a loan because of continuous income changes and a change in the frequency of earnings.
  • Account Information : This is one of the most important sections of a credit report. This connects the bank or financial institution to a person’s financial status. It has all the records of a person’s previous and ongoing loans and credit card statements. It also contains information about how frequently does the person make repayments and if he or she has missed any dates. The account information also holds the bank account details of the person. The details consist of the type of account the person has, savings or current, single, or joint account. This helps them understand their behaviour and determine if they should be lent money.
  • Enquiry Information :Enquiry information section is one which consists of the details of all the banks that are considering the person for lending loans or credit cards. These enquiries are made by different banks and NBFC keeps your credit score in mind. So, in order to be a worthy candidate for getting a loan, make sure you maintain a good credit score.

Common Terms You Need to Know While Analysing Your Credit Report

  • DPD (Days Past Due) : Days past due means the days that have passed since the due date for repayment. It is very important to avoid numbers in this column as it leaves a bad impression. People should try to keep it zero.
  • CN (Control Number) : A control number is a nine-digit number that acts as a reference to the credit report. In case a person has any doubts related to his or her credit report, he or she can consult CIBIL with this number.
  • Settlement Amount : Sometimes, there are situations when the lender and the client get in a payment dispute. In such cases, the lender and the client come up with an agreement to pay a final amount that is less than the loan amount called the settlement amount.
  • Written Off Amount : When the client and the lender decide on a settlement amount, the leftover amount is known as the written off amount.
  • NPA (Non-Performing Asset) : The payments that are pending over 90 days are termed as NPA.
  • SUB (Sub Standard Account) : Any account that has remained NPA for more than a year is termed as a SUB.