How to Read a CIBIL Report

What is Credit Score for Loan

A credit score is a score that is usually between 300-900 and is calculated to rate the creditworthiness of an individual. Put simply, a  higher credit score indicates that there’s a higher chance that an individual will be able to repay their loan in a proper and timely manner. A credit score is calculated by taking into account some of the factors mentioned below.

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How is a Credit Score Calculated?

Credit bureaus calculate credit scores based on factors that include but aren’t limited to:

1. Repayment History

Credit bureaus take into account past repayments of loans, credit card bills, and EMIs to understand an individual’s pattern of repayment. A steady history of timely repayments leads to a higher credit score.

2. The Number of Credit Accounts

Though this has a minor effect on an individual’s credit score; more credit accounts have a positive effect on credit scores.

3. Credit Utilisation Ratio (CUR)

Each credit card comes with a credit limit. CUR is the percentage of the credit limit being used each month. The higher the amount spent each month on a card leads to a higher CUR. Ideally, the CUR should be within 30%, as anything above that can have a negative impact on the credit score.

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What is a CIBIL Score?

CIBIL stands for Credit Information Bureau (India) Limited and is one of the top credit bureaus in India that calculates and creates credit score reports. Getting a credit score calculated is simple and as straightforward as logging on to the CIBIL website. However, once a CIBIL report is created, here are some of the important pointers to look out for in the report.

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‍What are the Different Sections in a CIBIL Report?

A credit report has multiple sections and it’s easy to be confused about the different information that is being presented. Below are some of the sections in a credit report:

1. CIBIL Score

This is one of the two important sections in a CIBIL credit report. This CIBIL score chart section will reflect the calculated CIBIL score. A good CIBIL score range is between 700-900. This is the crucial number that lenders keep in mind when gauging an individual’s creditworthiness.

2. Account Information

This section is the other important section in a CIBIL report. The account information section shows all the past information regarding loans, repayments, past history with credit, and lines of credit. The information is shared in the form of a table and has information such as:

• The name of the lender
• Type of credit
• Type of account and account number
• Date of opening account
• Last payment and date
• Loan amount and outstanding balance
• Record of the repayment (up to 36 months)
• The Days Past Due (DPD) (the amount of time the payment has been due)

Based on the above information, the account is given a status:

• STD (Standard): Implying that payments were made in a timely manner, ie, within 90 days
• SUB (Sub-Standard): Implying the payments were delayed, ie, after 90 days
• SMA (Special Mention Account: Implying the account runs the risk of becoming a SUB account
• DBT (Doubtful): If the account has been a SUB account for over 12 months
• LSS (Loss): The account has been determined as a loss

Please note: STD is the only positive status. All other statuses are negative in nature.

3. Inquiry Information

This section shows which lenders have inquired regarding the individual’s credit history. This happens after they put in an application for a loan. Following the application, lenders reach out to CIBIL to see whether it is risky or not to give said individual a loan.

When an individual makes decisions that negatively impact their CIBIL score, their score is lowered. However, there are certain steps they can take to improve their CIBIL score.

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How to Improve CIBIL Score

A low CIBIL score leads to difficulties while getting loans. A good CIBIL score rating is above 700 and is considered healthy. There are a few steps that can be taken to improve a low CIBIL score or maintain a healthy one:

1. Make timely payments on bank loans, EMIs, and credit card payments

2. Utilise a reasonable amount of credit on credit card, ideally below 30% of the credit limit

3. Paying dues off in full before the stipulated time also helps improve one’s CIBIL score

The biggest factor that lowers a CIBIL score is if EMIs aren’t paid on time. 

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Importance of Paying EMIs on Time

It is especially important to pay EMIs on time as it creates a precedent of timely payments. This in turn raises the CIBIL score and makes it easier to get loans at better interest rates. For example, when an individual takes a personal loan for education from an organisation such as Propelld, it is important to pay the EMIs in a timely manner to avoid a reduction in their CIBIL score.

‍Frequently Asked Questions About CIBIL Scores

What is considered a good CIBIL score?

A  good CIBIL score is between 700-900.

Does a loan rejection affect the CIBIL score?

Whenever an individual files an application for a loan, the bank they apply with will make an inquiry with CIBIL to receive information about the applicant’s CIBIL score. This is known as a hard inquiry and does affect an individual’s CIBIL score. Also, when a loan application has been rejected, applying for another loan immediately after also reduces an individual’s CIBIL score.

How to check a CIBIL score online?

Log on to https://www.cibil.com/ and follow instructions to check your CIBIL score online.

How often does a CIBIL score get updated?

CIBIL scores are updated every 30-45 days.

How can one report errors in the CIBIL report?

It is simple to raise a dispute if there are errors in the CIBIL report. The first step is to thoroughly read the CIBIL report and check for any mistakes. If there are errors — in the DPD days, account details, outstanding payments etc, there are a few easy steps to resolve the problem. Log on to the customer dispute section of the CIBIL website and follow the steps provided.