The Importance of CIBIL Score and Why you should get it

Back when the RBI was still under the leadership of ex-governor Raghuram Rajan, Indias central bank had directed credit information companies a base level credit information report (CIR) for individuals. The directive sent to credit bureau guided them to send a report to all the individuals they have a report on, for free of cost. This move was is expected to be made mandatory at the turn of the new year on January 1, 2017.

Now, you might be wondering why you are being told this. Well get to that bit in a bit as you read on. What we want you to do is apply for your credit report even if you are not planning to get a loan in the near future. Why, you ask?

Here are a few reasons:

Keep Track of your Loan Accounts

Now you may not have any outstanding loan amounts to repay, but sometimes the lender youd already borrowed a loan from might have failed to close your loan account due to a clerical error. If you have any such account still existing, theres no way for you to know about it. This is where getting a credit report will come to your aid. You can simply go through your report once in a year and so just to make sure that ther is no discrepancy with regards to your finances.

Help Maintain your Credit Health

This is yet another reason why you should get your hands on your credit report. Having a report would help you check how timely you have been with your loan payments, how your payments are affecting your credit score, and help you figure out ways to salvage your score. Also, credit reports contain information that tell you whether you loan accounts are settled, suit fixed, and written off, which will help you take some corrective actions if there is a misrepresentation of facts.

Make sure the Information is Accurate

Every credit report includes information provided to the bureaus by banks and these reports at times make errors in the reports. For instance, they might end up tagging a borrower as a defaulter even though they are repaying their loan. Such things usually happen in a very few isolated cases. However, when and if they happen, they will wreak a havoc on your credit report and will subsequently bring down your credit score. Checking your credit report on a timely basis will help you take care of such errors.

Build your Credit Score

Not every individual has a credit score to show for their finances and lack of it thereof. So, if you get a credit report with a no-score, you will know that you need to build a credit history in the right way. Just to help you with this, heres how credit scores are segregated based on their risk factors.

ScoreRisk LevelSignificance of Risk Level

850+Very low The borrower will pose little to no threats with regards to repayment.

750 to 850850+There may be some risk involved when it comes to repayment. However, the number is very miniscule.

650 to 750ModerateThis is what we call the average score. Meaning, theres like a 60:40 repayment, risk ratio.

500 to 650HighThe borrower is quite likely to default on loan repayments and the lender may incur losses.

300 to 500Very highCredit history suggests that the borrower has failed repaying most of their loans and runs an extreme risk of defaulting on loans they borrow.

To sum it up, going through your credit report once in a while will help you assess your financial situation and the steps you can take to make sure the scores wont tumble for the worse.

Thank you for going through our slide.

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