Wow!! It is amazing how we all are now aware of the importance of CIBIL. Check your CIBIL score for free right here. However, there is a small read on CIBIL as well as, how a free online tool helped a friend.
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Around 18 years back, I guess in 1997 my friends and I got talking about how important it might be to maintain a good credit history in case there is a transparent system to track all credit transactions, repayment behavior and the likes. This would be more like the FICO credit system available in the west since late 1950’s. It was quite surprising that there was no such platform in India in spite of passage of almost 40 years of the FICO system coming into place. As expected in the year 2000 CIBIL came into existence which is in short for Credit Information Bureau India Ltd, a set up which would now have a tight leash on individuals who have an outstanding loan or taken a credit from lending institutions like banks, NBFCs and so on.
Similar to CIBIL Credit Bureau, there are multiple other bureaus which came to existence around the 2005 – 2010 that track your credit score. The three bureaus which started after CIBIL are Experian, Equifax, CRIF High Mark. The regulator has made it mandatory for all financial institutions be it banks, NBFCs, MFIs, etc to report any kind of delay or default to all the bureaus operating in India. This ensures that there is consistency across all the bureaus and the credit of a customer can be gauged better. So when one says that would like to check his CIBIL score, he is using one of the bureaus to check his credit score.
In 2003, we both were working in a leading telco based out of Bangalore and had some things going well for ourselves. This was around the Telco boom when all leading folks in India were paying great incentives for successful sales guys and clinching network deals at a premium. In 2005 this friend of mine took a loan for his sister’s marriage. Things were all find till 2008 when he paid the EMIs on time. Around 2008, he unfortunately underwent a surgery and was out of his job for 6 months. Paying the EMIs was getting difficult and he choose to default for couple of months as there were only 6 EMIs pending. Once he was back on his feet, he approached a bank to check on how to clear the balance. While the outstanding was approximately 90,000/- he spoke to the bank and made a payment of 45,000 and settled this with the bank. As a sales guy it was a sense of achievement as it looked like he got a good deal. Little did he know that the settled letter that he got from the Bank would hurt his CIBIL score. In 2013, he needed a personal loan for his home renovation and applied via HDFC Bank. To his surprise his application got rejected. He was not sure what the reason was and assumed that it was due to some documentation issue. However, he did not care as he managed funds from family. Recently he did a free online CIBIL score check to realize that his CIBIL was around 650. Now he joined the dots that the CIBIL score could be the reason for his application getting rejected couple of years back. He immediately checked on how this can be rectified and got working on it. He now has a clean slate and running a home loan as well as a personal loan and is sure not to make any blunders around this.
Some of the factors that affect your CIBIL score are shared below.
- Track record of your repayments
- A good credit mix of secured and unsecured loans
- Recent Loans and Credit cards
- Duration of the debt being serviced
- Credit utilization and the amount outstanding
- Being a guarantor in other loan applications
- Closing a credit card
- Settling an outstanding (without a no due certificate)
The credit score of a person is now gaining further importance across multiple aspects of life. This could be right from your credit cards, personal loans, home loans, car loans or in fact any form of credit that one would like to access. It would be prudent to keep a timely check on your credit score which can be checked online and in our case for free (of course an approximate score based on your financial inputs and not an accurate one like what the credit bureaus would share).
So go ahead and try the free online CIBIL score calculator to learn about your score. By doing a Free CIBIL Score Check, you can get to know your approximate financial status and your eligibility for getting a loan. A quick heads up, this works with an accuracy of over 90% and has kept multiple parameters in place. The score is shown in a certain band which would help you understand your score. This is not a replacement of the actual CIBIL report (Rs 550/-) which would be detailed on every transaction of yours, but why pay when you don’t need it.
So, what are you waiting for, do a Free CIBIL Score Check now,Check your CIBIL Score for Free