Applying for loan? What’s your credit score?

Lokmat News Network

Nagpur, Aug 5

Today, the millennials are used to fast life and getting everything early in life. It could be latest iPhone, an SUV or for that matter your dream home. It is easy to buy things these days as opposed to earlier days, when applying and getting loans was a tedious process.

NBFCs, banks, e-wallets, are available at Point of Sale (PoS) to facilitate your dream purchase.

It is a good thing, but we often get to hear that “Sir your Cibil score is not upto mark and hence we are sorry that we cannot provide you the loan.” So what exactly is CIBIL and how does it arrive at your credit score?

CIBIL is India’s first credit information company, which gathers your credit information from various sources and maintains your Credit Information Report (CIR), which is then accessed by any lender or bank, before extending loan. Granting of loan depends on your credit score which ranges between 300-900 points. Your eligibility to get loan goes up by 90 per cent, if your score is more than 750. Your credit score is the summary of credit you have availed such as credit cards, over drafts, home and auto loans, personal loans et al.

Factors that can affect your credit score

Credit Cards

When you buy things on credit card, you create a credit history. If you default or make late payments on your credit card purchase or withdraw cash and do not deposit on time, it reflects on your account and affects your credit score. This gets recorded in your CIR and affects your CIBIL.

Bank Account

We have multiple bank accounts and sometimes they get dormant, if we do not use them for longtime. There are charges on that account (annual maintenance fees, SMS service charge etc) and these get deducted from the account. If there is no balance in the account, these charges get accumulated and negative balance is created. These also affects your credit score.

Utility Bills

Nowadays, we pay most of our utility bills such as electricity, water tax, dish TV payments through our bank accounts. If we default on them and pay them after the due dates, it also reflects in our CIR and affect our credit score.

Loan guarantee

If you are a guarantor for a loan taken by someone else and if that person defaults the payment and does not pay the lender, then also it affects your credit score and is captured in your CIR. And with the current regulations, if the person who has taken loan, does not pay, then the guarantors have to pay the loan.

Payment defaults

If you do not pay your credit card dues or home, auto or personal loan EMIs (Equated Monthly Installments) regularly. This would also affect your credit score and will be reflected in your CIR.

So, if you want to avail loans make sure that you take care of all the things, which can have an adverse impact on your credit score.

n Avoid making loan payments after due date

n Always properly close any loan account or bank account and obtain no dues certificate from the concerned lender

n Report the matter to CIBIL if you come across any discrepancies in your CIR. There is a dispute redressal mechanism available on CIBIL website