CIBIL role in the Loan Approval Process

CIBIL’s products, especially the CIBIL TransUnion Score and the CIR are very important in the loan approval process.
The credit score helps loan providers quickly determine, who they would like to evaluate further to provide credit. The CIBIL TransUnion Score ranges from 300 to 900. Our data indicates that loan providers prefer a credit scores which are greater than 700.

Once the loan provider has decided which set of loan applicants to evaluate, it analyzes the CIR in order to determine the applicants eligibility. Eligibility basically means the applicants ability to take additional debt and repay additional outflows given their current commitments.

Post completion of these first 2 steps the loan provider will request for the applicants income proof and other relevant documents in order to finally sanction the loan.

Credit Information Bureaus and 'CIBIL'

A credit bureau is a repository of credit information of all customers of its members, which comprises banks and financial institutions. CIBIL (Credit Information Bureau of India Limited) is one such organization that collates credit information contributed by its members and disseminates it to lenders, helping them in their credit-decision-making and lending process. CIBIL houses only credit information i.e. information on loans and credit cards. It does not have any details of customers’ savings accounts or fixed deposit accounts. Members share this credit information of their customers with CIBIL month on month so that CIBIL’s database is updated. This information is then used by credit underwriters to make effective credit decisions.
Therefore, with proper financial planning and by maintaining a good track record of repayment of dues for loans / credit cards, you will be able to build a good credit history for yourself. This, in turn, may help you in getting future loans / credit cards easily or on better terms.
Frequently Asked Questions
Is CIBIL the only credit bureau in the country?
Is CIBIL a list of defaulters?
Are all customers’ names reported to CIBIL?
On what segments does CIBIL provide a credit report?
What is the content of a CIBIL report?
How is a credit report helpful to credit underwriters?
How can a customer maintain a good credit history?
Who contributes credit information to CIBIL?
Do customers have access to CIBIL’s report through CIBIL’s website?
Can a customer’s name be removed from CIBIL’s database?
If a loan/credit-card application is rejected, will it be reflected in the credit report?
If a loan is denied to a customer by one bank on the grounds of the CIBIL report, will it be denied by other banks too?
If a customer’s family member has defaulted, will it affect the customer’s status in CIBIL’s records?
How many days does it take to update a customer’s payment status?
A customer complains that CIBIL’s report generated by X bank / financial institution does not show the details of other loans / credit cards that the customer maintains with other banks and/or financial institutions.

Is CIBIL the only credit bureau in the country?
As of September 2008, CIBIL is the only credit bureau in India. But some other credit bureaus are planning to set up in India soon.

Is CIBIL a list of defaulters?
No. CIBIL maintains account information of various loan customers and credit card customers, whether they are defaulters or not. The information comprises their name, address, monthly repayment track record, outstanding amounts, etc.

Are all customers’ names reported to CIBIL?
Only borrowal accounts, i.e. those customers who have availed of a loan or a credit card from a CIBIL member are reported to CIBIL. Details of liability accounts such as savings, fixed deposits and recurring deposits are not shared with CIBIL.

On what segments does CIBIL provide a credit report?
CIBIL is a repository of credit information and in the consumer segment it provides information on the various loans availed of and cards held by an individual from a member bank. Its commercial report covers the credit availed of by non-individuals.

What is the content of a CIBIL report?
CIBIL only reports loan and credit-card information such as repayment track, loan type, amount outstanding, loan amount disbursed, various dates, etc. The report also contains a customer’s personal information like name, address, date of birth, phone number(s), passport number, voter’s ID number, PAN, etc. In a commercial credit report the inputs are similar but include some additional details pertaining to the commercial entity like legal constitution, registration number, etc. The credit report does not provide any opinion or comment on whether a loan should be extended to a customer. It reports the facts that its member banks and financial institutions have reported.

How is a credit report helpful to credit underwriters?
The credit report shows account information such as repayment record, defaults, type of loan, amount of loan, etc. of the customer. This information facilitates prudent decision-making when the credit underwriter processes the loan/credit-card application.

How can a customer maintain a good credit history?
A customer will be able to build a good credit history by proper financial planning and by maintaining a good track record of repayment of dues for loans / credit cards.

Who contributes credit information to CIBIL?
The information is contributed by banks and financial institutions that are members of CIBIL.
Do customers have access to CIBIL’s report through CIBIL’s website?
No, at present customers do not have access to CIBIL’s website to be able to generate CIBIL’s report

Can a customer’s name be removed from CIBIL’s database?
Member banks contribute to CIBIL on a monthly basis data of all their customers who maintain a loan/credit-card account with them. Hence a customer’s name cannot be removed from CIBIL’s database.

If a loan/credit-card application is rejected, will it be reflected in the credit report?
A credit report reflects only credit information reported by member banks. Hence, details of loan applications are not available in the credit report. However, information about the number of times a CIBIL report has been generated can be obtained from the “Enquiries” section in the CIBIL Report.

If a loan is denied to a customer by one bank on the grounds of the CIBIL report, will it be denied by other banks too?
Approval or rejection of a credit application depends on the bank’s policies. Rejection by one bank on the grounds of the CIBIL report might not imply rejection by another bank.

If a customer’s family member has defaulted, will it affect the customer’s status in CIBIL’s records?
The CIBIL report has information of loan/credit details of the borrower only. Therefore, for a retail customer, it would not matter if someone in his/her family has defaulted. If the customer’s repayment track record is okay, his/her credit score will not be affected by that of his/her family members.

How many days does it take to update a customer’s payment status?
Customers’ account information is sent to CIBIL month on month for update into CIBIL’s database. It takes generally 45-60 days from the month-end to update the record in CIBIL’s database.

A customer complains that CIBIL’s report generated by X bank / financial institution does not show the details of other loans / credit cards that the customer maintains with other banks and/or financial institutions.
CIBIL’s report generated by X Bank will show all the loans/cards relations the customer has with various banks, but without the identities of the other banks being indicated. In other words, X Bank officials will not know the name of the other banks with which the customer has loans/cards relationships. The names of the other banks will appear as “Not Disclosed”. This has been done to ensure privacy. However the customer can contact CIBIL at info@cibil.com with the enquiry control number of the credit report (provided by X Bank) to find out the details of the member bank that has reported a particular transaction.

Top 10 Frequently Asked Questions About Cibil Solved

There are many questions arising in the minds op people regarding CIBIL, its origin, its working criteria and so on. Here are some frequently asked questions about CIBIL with their appropriate answers:

1. What is Cibil?

CIBIL is the first and only credit information bureau of India which assembles and distributes information regarding credit accounts that a borrower has to its member institutions in form of credit information report. It contains the information of all the credit facilities availed by an individual and a firm.

2. Who are members with Cibil?

Almost all leading banks, financial institutions, credit card companies, Housing finance organizations, Non banking financial institutions and state financial corporations are members of cibil.

3. It provides credit reports on which sections?

It supplies information on consumer segment as well as commercial segment. The consumer department covers the credit facilities availed by an individual borrower and commercial department covers the facilities availed by proprietorship firms as well as private limited and partnership companies.

4. What is the main function of cibil?

Main function of the bureau is to gather information on all the credit accounts maintained by a customer and firm and provide it to it’s member institutions on request.

5. What is a credit report?

Credit report is record of customer’s credit history. It included the details of all the loans and other credit facilities obtained by a customer from any of the member institutions.

6. What information is available in credit information report of a borrower?

A credit report of a borrower has the following information:

• Personal information- Name, mailing address, date of birth, driving license no, pan no, voters id no and passport no.
• In case of a firm, it includes Registration Number
• Details of all the credit facilities that a borrower has
• Repayment history of all the accounts
• Amount overdue on an account if any
• Number of enquiries made by the members in past 12 months

7. This report is accessible to whom all?

Credit report can be seen by only the member institutions who have submitted their complete data to cibil. Disclosing this information is illegal.

8. Can an applicant view his/her own CIR?

The answer to this question is NO. But you can get a copy of your credit report from the member, if the institution has taken out a copy of your report.

9. Does the approval of a credit facility of a borrower depend on his credit report?

Cibil only provides the previous and current track record of your payments. It has got nothing to do with the decision on lending funds to you.

10. If any credit application is rejected, would this also be reflected in Credit report?

No, rejection is not updated in credit report because banks do not provide this information to cibil. Read answer 6 for more details of what is reflected in your credit information report.

What Banks Inform To Cibil – How Cibil Credit Score Gets Impacted By It

A CIBIL report basically is accurate information on the credit payment record of a borrower. CIBIL report is maintained by credit information bureau of India limited also known as CIBIL. This report is specially meant for all the member institutions of credit to help them know the repayment and financial status of any borrower who approaches them for a credit facility.

Credit report consist the information about all the loans and credit cards that an individual or a firm has from any of the member institutions. All this information is provided to CIBIL by the banks and other financial and non financial institutions who are members with CIBIL.

Banks uses this report to decide whether a credit facility should be given to a particular borrower or not. Financial institutions can judge the future prospects of payments by viewing the credit report of a customer.

Whenever a customer applies for a loan, credit card or insurance policy by a member, the institution firstly checks the repayment track record history of the individual in credit report.

If the payment status is regular and active then the application is eligible for fast approval and on a lower rate too. But at the same time, if therepayment track shows bounces and settlements in the cards and loans then the application may get rejected.

Sometimes a defaulter is also granted the credit facility, but at a very high rate of interest. This is because, any lending institution will not want to give money without getting it recovered. And so, the loan is approved on a higher rate so that, even if the customer fails to repay the loan after some months, bank has already recovered good amount of money through interest. Yourcredit report greatly affects your CIBIL score.

Reasons for Zero Score:

If there are no matches for any credit facility extended to you in CIBIL report then the credit score would be Zero or there would be no score.

Reasons for Low Score:

• Short age of reported accounts: If the average age of accounts reported in the report is reasonably short, then it means that all the credit exposure to the borrower is recent and the score would be low.
• If the recent repayment history in borrows account is not good or he has not made the payment due.
• Large no of enquiries – If there are large no. of queries made recently by the member institution for any credit facility applied by the customer, it lowers down the score.
• Large amount of credit exposure extended to customer recently will lead to a low score in CIBIL.
• Too many accounts showing in CIBIL report implies that the customer has very large credit exposure, exceeding his financial capability ofrepayment.

Reasons for High Score:

• If the average age of accounts reported in the report is more than 1 year, then you will have a good score.
• If the repayment history is good with no bounces then the score would be good.
• If there are less number of enquiries by the member institution for any credit facility applied by the borrower in last 12 months.
• If the amount of recent exposure is not too large.

Impact Of Bad CIBIL Score On Your Loans

Credit information bureau of India keeps the records of all the information on loans and credit card payments attained by an individual.

This information is maintained for all member institutions and banks of cibil and is made available to them whenever they need it. The bureau gets this data from its members only and this data helps the banks in decision making process, whether a loan should be given or not, credit card should be issued or not to a particular customer.

On the basis of the records of the payments that a customer has made towards its accounts, cibil issues a score to every individual and this score is known as cibil score.

This score plays a very important role in fetching you a high or low interest rate from your lender on a secured or unsecured loan. Secured loan is something in which you put something as a guarantee and an unsecured loan is a one, wherein nothing is kept as a guarantee and the funding is based on your income financials.

Cibil score impacts secured and unsecured loan in equal way. People might think that, they are keeping their property papers as a guarantee, which is a big deal and so cibil score would not matter much. But this thinking is wrong; you need to keep in mind that your lender would not grant you funds, if you are a defaulter.

• It would not matter, whether you are going for a secured loan or unsecured loan; the interest rate would be high if your cibil score is low and rate would be low if the score would be high.
• You may have to face rejection in both the cases, if the cibil score is below average. No point would be taken into consideration for a secured loan, as they are considered to be less risky.

The policies of a secured loan are different from that of an unsecured loan, and so the funds granting decision would depend on several factors. There might be a possibility that you may get some waivers on your case, if something is coming out of the policy, but cibil rules are same for both secured and unsecured funding with no much difference.