Things you should know about CIBIL score
Your credit history and credit score plays an important role in any bank loan approval process. A thorough check of your credit history and score is done before the banks approve your loan.
When you take a loan, you borrow money from a lender or a bank with the promise that you will pay it back within a specified period of time. Now, here is where your credit score comes to play. It is a statistical method to determine the likelihood of you paying back the borrowed money to the bank. Whether or not you will avail the loan will be determined by the credit score highlighting your past credit record.
Important parameters that are used to calculate an individual’s credit score are his or her credit payment history, current debts, tenure of credit history, credit type mix and frequency of applications for new credit. Every nation has different credit rating agencies who calculate the credit score based on different parameters. In India, Credit Information Bureau (India) Ltd (CIBIL) is the first credit information bureau which contains information regarding both commercial and individual borrowers.
In India, it is the CIBIL score that determines your home loan eligibility. In fact, it is essential for you to avail loans of all types – personal, home, trade or education loan. Also, your CIBIL score is cross checked at the time of joining a new company/organization.
Here are some of the common queries and doubts about consumer credit terms in CIBIL report card.
What are the most critical factors in your credit report for loan approval ?
- Payment History: It appears in the Account section and it has two part – DPD (Due Days Past) and month and year of payment. DPD means by how many days you have been late for payment. If the DPD for last three years is ‘000’, then it means that a you have a high probability of availing a loan from the loan provider.
- Current Balances: Current balances appear in “Account” section as well and it reflects the extent of your debt. Based on the total current balances on various loan accounts, a loan provider determines whether or not you would be able to bear the burden of additional EMIs in relation to your income.
- New credit facilities: If you have been sanctioned a number of credit facilities recently, then the increased EMIs would adversely affect your capacity to pay further EMIs. Hence, in case you apply for a fresh loan, the loan provider would enquire about any new credit facilities
- Number of credit facilities: If you have availed a number of credit facilities recently, then chances of getting a home loan sanctioned becomes dim. It is due to the fact that the loan provider becomes more cautious while sanctioning a loan in addition to those you have availed recently.
What is the difference between “Account” and “Enquiry” ?
“Accounts” section of your credit report contains current and past credit facilities availed by you. If you have procured a personal and a home loan from banks, then your credit report would show both accounts. The account details would include name of the lender, type of credit facility, dates of opening and closing, account status and current balances, etc. Your credit and payment history in the last 36 months will be covered in the report.
“Enquiry” section comes into play when the lender from whom you wish to avail a bank loan, accesses your credit report from CIBIL. Banks goes through the credit history in order to assess his/her home application. The ‘Enquiry’ section will be populated with the loan amount you want to avail, the name of the lender along with the enquiry date when the lender has accessed your account.
While “Account” denotes your current loan obligations, “Enquiry” denotes that you had applied for a loan or other credit facility from various lenders.
What is the difference between “High Credit” and “Sanctioned Amount” ?
‘High Credit’ is related to credit cards and overdrafts. It is the highest credit utilized in a single month over the life of the relevant credit card. For example, if you have spent an amount of Rs 90000 due to some medical emergency in a month on the credit card with a limit of Rs 100000, then it would denote the High Credit.
‘Sanctioned Amount’ is displayed in case of credit facilities other than credit card and overdrafts. It is the amount disbursed to you.
What is “Date Reported” ?
It is the date on which the credit information was reported to CIBIL.
What does “Written off” or “Settlement” reflect on your credit card ?
Your CIBIL credit report reflects your capacity to pay back a loan based on your past credit records. A loan settlement between you and the concerned bank means that you have not been successful to pay back your previous loan amount. An account on your credit report with the status of “Settled” may be judged negatively by the bank and you may be denied the loan by the bank.
What does DPD means ?
DPD in your credit report means Days Past Due. It is related to the month and year of payment. DPD indicates how many days a payment on that account is late on that particular month. If for every payment detail for an account in the last 36 months is ‘000’, then it means that you have never been late to pay on time for the specified period. Anything other than ‘000’ in the DPD section may be interpreted negatively by the loan provider.
