Playing a critical role in India’s financial system, Credit Information Bureau (India) Limited or CIBIL is a Credit Information Company (CIC) founded in August 2000. Whether it is to help loan providers manage their business or help consumers secure credit faster and at better terms, the use of CIBIL’s products have led to a massive change in the way credit life cycle is managed by both loan providers and consumers.
MYTH- Having my name with CIBIL means that I am a defaulter.
FACT – Every bank or financial institution, which provides credit facility, submits a detailed report of all individuals on a monthly basis. Thus if you have taken a loan, the CIBIL will have your repayment data with it. Repaying your previous loans on time will be taken as a good sign and will instil loan providers to sanction further loans quickly.
MYTH- My assets, income, investments; all have an impact on my credit score.
FACT – The CIR (Credit Information Report) contains details related to your loan and credit card. It shows how good or bad you are when it comes to repayment. Your bank account status, investment in equity or other financial tools, details of real estate or other assets has nothing to do with CIBIL.
CIBIL only evaluates the loan history and provides a score based on it. At a later stage it is the bank which may enquire about your income proofs or assets for collateral security.
MYTH- CIBIL helps banks & credit institutions only.
FACT – It helps banks and credit institutions in making financially sound lending decision. Customers too are benefited because of:
Faster loan approvals
Better terms on their loans
It helps in maintaining financial discipline
In a nutshell, CIBIL will help you understand how a lender evaluates your loan application so that you can apply only when your chances of an approval are high and hence, avoid the unnecessary embarrassment of a loan rejection.
MYTH- Using cash is always better than credit cards or loans.
FACT – Making purchases using a credit card and clearing them off by due date gives you free credit time. Carrying too much cash to the market is a risky preposition. However, it is advisable to use cash if you have a tendency to overspend on your credit card.
Alternatively, if you have good financial discipline, credit cards help you build credit history and allow you to take advantage of reward programmes such as fuel cash back, air miles and a host of other giveaways.
It is better to use credit (loan or credit card) than cash when you have never availed any credit till date and want to build a credit history. Having a credit history enables a lender to assess your credit-repayment capabilities by determining whether you have managed your credit responsibly. Your credit history enables the bank to assess your ability to service any additional debt that you may require. If you don’t have any loan or credit card and solely rely on cash or a debit card then the bank does not have any reference to check your payment track record and will solely rely on other factors such as income and demographics to evaluate your loan application. Having a good credit history will help in faster loan disbursals and may be even better terms.
MYTH- A low score means I will never get a loan or credit card.
FACT – Not necessarily, every financial institution has its own lending score bandwidth. You may get a loan but the interest rates and charges may be higher as the perceived risk associated with a low credit score is higher.
MYTH- Repeated checking of own credit report will bring the credit score down.
FACT – Whenever your credit report is accessed by banks, this reflects as an “Enquiry” on your credit report. An enquiry indicates that you are seeking new credit. However, when you check your own credit report directly for CIBIL this “Enquiry” will not reflect in the credit report and has absolutely no impact on your credit score. It is a good practice to review your credit report periodically.
MYTH- CIBIL has the authority to make corrections in my credit report directly.
FACT – CIBIL is not authorised to make any changes in your report directly. Any change that needs to be carried out has to be initiated/approved by the respective bank & credit institution and only then can CIBIL make any changes to your CIR. However, CIBIL helps facilitate this process.
Source:Secondary
source your credit score. However, if you have missed an EMI or credit card payment (because of the bounced cheque) it will have an impact on your credit score.
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