Learn How CIBIL Determines Your Credit Rating

Credit Information Bureau of India Limited was formed in the year 2000. It has 169 members till date and all of them are leading banks, both nationalized and private ones, Financial institutions, housing finance organizations, Non banking financial institutions.

The main objective of CIBIL is to gather and preserve the information on all the credit facilities availed by a borrower and the repayment status. Credit bureau keeps this information for all its member institutions to help them take lending decisions impartially.

CIBIL credit score system basically is to impart a score to the customer on the basis of the repayment track record of the loans and cards payments that he is suppose to make to the member banks. The score ranges from 100 to 999. The good score or a high score indicates a good credit report and vice versa.

Scoring system is divided into three forms:

* Zero or no Score
* High
* Low

Let us understand how a score is actually determined for a CIBIL report.

I. Zero Score:

* If there are no matches found in last 12 months for availing a credit facility, then the there would be no or zero score.

II. Low score:

* If the average time of all the accounts matched in the report is practically low, then it means that all these facilities are recently availed and you will have a low score.
* If the current payments are due and bounced, it indicates that the borrower is a non performer and the account is rated as a bad account.
* If there are too may enquiries by the member institution in your CIBIL for a credit facility, it shows that customer is desperately looking for the loan and financial condition may not be that strong.
* If amount of recent exposure extended to the borrower is large, the score would be low.
* And if, there are too many loans and cards reflecting in the CIBIL, it shows that he customer is over burdened and is not capable of making the payments anymore.

III. High Score:

* If age of all the accounts in your report is 12 months or more.
* No bounces till date in any of the accounts and no amount overdue.
* Decent recent exposure to the borrower
* Less number of enquiries by the member banks for a credit facility.

Credit rating is something which is determined by the CIBIL score of an individual. Your rating would be good if you have a decent score say 500; it is going to be excellent on 800 and bad on 0.

A good credit rating can fetch your many benefits like fast approval, low rate of interest, extended term and bigger loan amount. On the other hand a person whose rating is not that good may face a rejection or lesser amount approval, a very high interest rate and short tenure.