What is CIBIL?

CIBIL stands for Credit Information Bureau India Limited and it provides a credit report that helps consumers or loan seekers as well as banks or loan providers to make an informed decision regarding rejecting or approving any loan application. CIBIL was established in the August of 2000 and it is basically a credit Information company i.e. CIC or in simple words a credit bureau. Since last ten years it has played a very crucial and an important role in the Indian financial market.

CIBIL also keeps track of commercial and business payments that are relevant for loan approval or reflect their credit history. Banks and credit card companies supply the relevant information on a monthly basis to CIBIL, which helps compile the Credit Information Report (CIR) and generate a credit score. The Revenue bureau of India (RBI) licenses and approves the establishment of any credit bureau. Any credit bureau such as CIBIL is governed by the laws and regulation of The Credit Information Companies Regulation Act, established in 2005.

What is a credit score?

CIBIL has two crucial products namely the CIBIL TransUnion Score and the CIR. The CIR comes with a credit score that reflects the candidate’s credit history and explains their previous loan and credit card summary. Credit or CIBIL score can be any three digit number ranging from 300-900 and reflects upon an individual’s or a loan applicant’s capacity to repay the loan. CIBIL has fostered the concept and vision of Credit information sharing. This numeric summary of the individual’s credit history basically reflects upon the person’s financial stability. Higher score i.e. closer to 900 indicates higher chances of having a loan request approved and sanctioned easily.

The CIBIL TransUnion Score has its own definition of explaining what an ideal and a good score should be like. The concept of good score also differs from one bank to another. For some a score of 670 might be good enough but for others it might mean a bad score. Some loan providers require a score of higher than 750 also.

Role of CIBIL in loan approval process:

The CIBIL score acts like a screening stage in the loan application process. The CIR helps determine the customer’s eligibility in terms of their capacity to undertake more debt and then repay all the debt along with other financial commitments. After this preliminary screening process other relevant documents such as income and tax proof are required in order to complete the loan approval process. Having a credit report has helped getting a loan approved in a shorter duration of time and it also proves to be a cheaper and an economical method for the banks and the loan providers. This has increased the transparency in the loan approval process and helps a loan seeker be clear about what is expected out of them in their loan application process.