The Credit Information Bureau India Limited or CIBIL is one of the 6 registered Credit Bureaus in India that collects and stores your credit information. The analysis of this information provides you with a CIBIL score that depicts your creditworthiness. Ranging between scores 300 to 900, the CIBIL score is shared with financial institutions and banks in order to determine acceptance or rejection of your loan application. The higher the CIBIL score, the easier it becomes to get your loan application accepted.
Your CIBIL check has more to it than you might know. Have a look at a few interesting facts about CIBIL Score.
Artificial Intelligence and Credit Score
Source: CRIF High Mark
In today’s age of technological advancement, Artificial Intelligence is at the forefront of many industries. The banking sector is also open to exploring the possibilities of reform that AI can help in. With regards to credit score, AI systems can provide support to make quick credit decisions. This technology allows lenders to identify risky borrowers through estimation of their income capacity and forecast of their repayment record.
With the increased use of social media and mobile-based applications, financial technology firms can access and assess permission-based data of users. Apart from that, digital transactions and GPS information can help AI technology to create an income and risk profile of users.
First-time loan applicants with no credit history can thus benefit because the data collected and analysed by Artificial Intelligence Technology will help in the prediction of their loan repayment.
No defaulter’s list is maintained by CIBIL
CIBIL and other credit bureaus are responsible for the collection and maintenance of an individual’s credit information which is provided to them by the banks and other financial institutions. However, they do not generate or conserve any defaulter’s lists whatsoever.
The vast ownership structure of CIBIL
CIBIL holds significant leverage in the Indian financial system. The major stakeholders in its ownership structure are the banking and non-banking firms. TransUnion International Inc. is the most indispensable stakeholder at 66% hold in CIBIL. Apart from being a data analytics company, TransUnion International Inc. also provides information management and helps businesses manage financial risks.
The remaining stake of CIBIL is distributed amongst different firms such as ICICI Bank, Union Bank, BOI, BOB and a few other financial institutions. This distribution makes CIBIL an important aspect to be considered by loan borrowers with respect to their financial health.
Access to credit report
Credit bureaus in India provide you with a credit report for a fee. But once a year, it is mandatory for the bureaus to give you access to the CIBIL credit report for free. TransUnion CIBIL will have to share the credit report once for free too.
Impact of checking CIBIL score
Individuals worry if multiple inquiries for their CIBIL score will affect their score negatively. If borrowers themselves pursue an inquiry directly from the credit bureaus or the authorized entities (termed a soft inquiry), it will have no effect on their CIBIL score. However, if your banks or creditors inquire about your CIBIL score from the credit bureaus (termed a hard inquiry), it will negatively impact the score.
Relevant details included in the CIBIL check
CIBIL credit report includes details about your current and past credit activities. This summary has nothing to do with other accounts like Fixed deposit, savings, trading or other investment accounts. This information does not impact your CIBIL check.
CIBIL has recently launched a new version, called CIBIL 2.0. CIBIL 2.0 provides a score to first-time borrowers who have less than 6 months of credit history. Your score may range from 1 to 5. If a borrower is given a CIBIL Score 1, they are at the highest probability of becoming a defaulter. And while a score of 1 implies high-risk, a score of 5 implies low-risk. However, not all lenders may have switched over to the latest version of CIBIL. Those who have no credit history at all will be given NA/NH (Not Applicable/No History).
Mistakes that can be avoided for a healthy Credit Score
It is important to understand that approval of loans and your financial health is parallel to the CIBIL score that you hold. Taking care of a few things can help maintain a good score:
- Skipping or delaying credit card payments is one such mistake. Consider setting an auto-debit system in order to make your credit card bill payment monthly.
- Additionally, ownership of multiple credit cards might also prove to be a source of concern. It might also increase your chances of missing transfers, payments, et al. This can negatively affect your CIBIL check.
- Hard inquiries for loans from multiple lenders simultaneously can reflect badly on your credit score. It’s better to make comparisons online and choose one lender before going forward with an inquiry.
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