Why one's credit record matters





What is a credit information company (CIC)?

A CIC collects and maintains records of an individual's payments pertaining to loans and credit cards. These records are submitted to the CIC by banks and other lenders, on a monthly basis. This information is then used to create Credit Information Reports (CIR) which are provided to lenders in order to help evaluate and approve loan applications.

CICs are also commonly referred to as Credit Bureaus. CIBIL is India's first CIC that provides credit information to credit institutions and individual consumers.

The use of CIBIL CIRs is best illustrated with an example. I have a home loan with Bank A and a credit card with Bank B. Banks A and B have submitted my personal information and payment details to the credit bureau (in this case it was CIBIL).

Recently, I applied for an auto loan to Bank C. Upon receiving my application, Bank C requested CIBIL for my CIR so that it could assess how I have been paying my current dues and whether I will be able to manage the additional burden of another EMI.

While the bank also requested my Form 16, savings account statements and other identification documents, the CIR has become an often used tool in evaluating loan applications.

What information does a credit information report contain?

A CIBIL credit information report (CIR) is a month on month record of an individual's loan related EMI or credit card payments.

Other information included in a CIR is as follows: Personal information related to the individual such as name, date of birth, address and identification numbers like PAN number, passport number, voters number and telephone number. Account information such as the type of loan taken (home, auto, personal, overdraft, etc), the size of the loan, the current balance outstanding, overdue amount (if any), number of days a payment is overdue (if there is an overdue amount) and so on.

Information on the number of ‘enquiries' made by the banks on the individual. An “enquiry” is created every time the lender requests the credit bureau for your CIR.

Does CIBIL or other bureaus maintain a defaulters list?

No, this is a very common misconception. CICs collect information. pertaining to individuals who make payments on time and on those who are in default.

(The author is Senior Vice-President, Consumer Relations, CIBIL)

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