Tackling the credit risk

CIBIL’s awareness meet on how to improve credit score by becoming disciplined in financial transactions proved a boon to borrowers as well as lenders. A look by R.P. Deshpande


At a press meet in Bangalore, Arun Thukral, Managing Director of Credit Information Bureau (India) Ltd. (CIBIL), explained the important role of Credit Information Report (CIR) and TransUnion Score in the credit system.

To get the basics right it was explained that CIBIL provides comprehensive credit information on consumer and commercial credit to credit grantors such as banks, NBFCs, FIs, HFCs etc. CIBIL’s analytical and risk management tools help lenders mitigate credit risk and ensure superior quality portfolio performance.

Huge growth

Mr. Thukral furnished details of the growth of CIBIL in the past eight years.

The consumer bureau, starting with 4 million records in 2004, has now more than 200 million credit records which is collected from 800 members (credit grantors) and still going strong. The commercial bureau which started with 0.7 million records has now more than 11 million records.

Mr. Thukral explained how to analyse a Credit Information Report (CIR) and how Credit Score is arrived at. The CIR provides personal information, contact information, employment information and account information of consumers, loans taken (home loans, auto loans, personal loans etc.), credit cards bought etc.

It also provides details such as type of loan, its size, repayment terms, present outstanding, present status, repayment pattern for the past 36 months and the inquiries made by the consumer with various lenders.

The credit score awarded, ranging between 300 and 900, is based on credit behaviour as reflected in the accounts and enquiry sections of the CIR.

Mr. Thukral emphasised the need for the consumer to get his/her CIR and TransUnion Score directly from CIBIL, which will be of help while seeking credit facility from banks or other institutions.

The procedure is made simple as any consumer can have his CIR and Credit Score online, by paying the requisite fees online.

He gave tips on how to improve one’s credit score by becoming disciplined in financial transactions, repay loans in time and manage with fewer credits.

Faster decisions

Mr. Thukral also spoke on recent trends in the home loan sector and explained how CIBIL has been instrumental in helping banks and HFCs in taking right and faster credit decisions basing on CIR and Credit Scores, managing home loan assets prudently and reducing delinquencies.

FAQs and a good credit score

The awareness exchange programme organised by CIBIL also spoke of some important factors that help in determining one’s credit score. Here are some frequently asked questions:


How is the credit score calculated?


An individual’s credit score is calculated based on the information in the ‘Accounts’ and ‘Enquiries’ section of the CIR. Amongst the various attributes that are proprietary in nature, majority of the score is made up of the following factors:


Credit utilisation: How much credit is the consumer using?


Defaulting: How many accounts are past due – how much and by how many days?


Number of enquiries: Has the consumer applied for additional credit lines?


Trade attributes: How old are this consumer’s lines of credit? What type of credit does he have? Does the consumer have a good mix or balance of credit, or, is it all credit cards?


What is considered a good credit score by banks?


While each bank has its own cut-off, it has been observed that most banks lend for a 750+. Apart from this, lenders may also consider critical factors such as your income-to-debt ratio, residential status, and professional qualifications while deciding on your loan application. But CIBIL does not recommend any cut-off score to banks for arriving at lending decisions. Each bank has a different risk appetite.


How to get inaccuracies corrected


* Purchase your own CIBIL R and Score. In case of discrepancies, log in to CIBIL’s Dispute Resolution webpage: >http://www.cibil.com/consumer-dispute-resolution


* CIBIL’s dispute resolution department will analyse and route the dispute to leading institutions for confirmation.


How to improve your credit score


The CIBIL TransUnion Score plays a critical role in the loan approval process. It is a dynamic number and changes with the consumer’s credit behaviour. Financial discipline, prudent credit management and a good payment history will ensure that the borrower enjoys good credit score. A good credit history results in speedier access to credit, and is beneficial to both the grantor and the borrower.