Thursday, December 4, 2008

Credit information Bureau (India) Limited (CIBIL)

CIBIL- was incorporated in 2000.The relationship between CIBIL and the Banks is that of close interdependence. Banks provide Cibil the information of its customers who have taken credit and there payments behavior and track record. CIBIL on the basis of information collated from all Banks, helps its member Banks to make faster credit decisions when they acquire new customers as they will be able to check his previous credit history.

The CIBIL Credit Score System:
It will be on a scale ranging from 100 to 999. Cibil collates data from its member Banks and creates a track of all loans, Credit taken by an individual and impart him a score based on his behavior of repayments of Emi’ s and Credit card from member Banks. Lower the CIBIL credit score lower the chances of getting money on credit. Say if your credit score is close to 100, then this implies, outright refusal of credit, requirement of additional security / guarantee, higher down payment, shorter duration and higher interest rates. If you have a very high CIBIL credit score, say 800, this implies, lower interest rates, waiver of processing fees and faster disbursement of funds.
So then, how can I improve my CIBIL Credit Score?
• Pay all your EMIs on Loans in time. And when you have more than one loan running it gets difficult to repay them or keep a track. So, it’s very important to make regular & timely re-payments of your loan to maintain your credit level.
• Never fail to pay the Minimum Payment required by your Credit Card. What is advisable is making full payments on your credit card every time. Credit Card is categorized as revolving credit and it helps in building a good credit history if payments are regular.
• Always make a budget for yourself & ensure your monthly income permits you to take a loan.
• Do not apply for loans or credit cards if not required. As this would mean more credit exposure. This could affect your credit score. Instead of applying for another loan, try checking for a top-up loan option on your existing loan. This will make your debt burden easier to manage.
• Use some of your savings to repay some of your debt. Always plough back extra income to reduce your debts. This will increase your credit score level.
• A cheque bounce on your credit card or on a loan also affects your credit rating.
• Avoid going in for settlements, although you make payments only for your purchases in a settlement it does bring down your score level. And never get into a write off case. This means not paying for your dues at all.

Now that you are aware of the CIBIL scoring system, please work on maintaining your score. Ensure that you are always in control of your finances. However, even if your credit score is low don’t be disheartened. The credit system always gives scope for improvement. You can start improving your credit score by simply paying of your debt and not opting for more until your score improves.