Good CIBIL score is a gateway to loans

Good CIBIL score and history can be a gateway for accessing loans from the banks and financial institutions for a prospective borrower. Because, before considering any loan/credit facility to an individual and /or to any business or professional enterprise they would look for credit score and history, among others. For them, good credit score and history is pivotal in taking the credit decision. Good credit score and history of credit aspirants would go a long way in getting the credit facilities sanctioned.

CIBIL stands for Credit Bureau of India, and the information about the credit facilities sanctioned by the banks and financial institutions to their borrowers get shared to it. Of course, that is with the consent of the borrowers/the guarantors as the banks and financial institutions do obtain consent letters from them as part of credit facilities documentation.  CIBIL maintains credit history of the borrowers/the guarantors based on the information received and the score depicted is backed by the history.

Good credit history
It is imperative for the borrowers/the guarantors to maintain good credit history and score in order to access the credit facilities from the banks and financial institutions. In order to maintain good credit history and score, one has to be prompt in servicing their EMIs to their loan accounts. In case of credit cards, one has to be prompt in payment of the dues there under without delay or default. The dues should have been paid within the due date as per the credit card statement.

CIBIL score of less than 600 is considered normally to be the hurdle for considering any credit facility. In case the Credit score is between 600 and 750, sanction of the credit facility has to be by one step higher than the authority who is vested with the discretion to sanction the facility. In case the credit score is equal to or more than 750, there is comfort level for considering and sanctioning the credit facility.

Chronic defaults
The CIBIL history also includes the details as to how the dues for a loan have been settled by the borrower. That is in case of chronic defaults in repayment by a borrower, bank or a financial institution would have accepted the lump sum amount for closure of the loan account under compromise-compromising a part of the principal or interest.

The loan would have also been settled by the defaulting borrower under ‘one time settlement-OTS’ scheme of the Bank/FI. Those facts will get reflected in the CIBIL history and may prove detrimental for considering the loans. CIBIL history will also show the cases where the loan sanctioned to the borrower has been written-off. Such instances will not only impact the credit score of the borrower but also put the prospective financers-banks/FIs under caution.

Since CIBIL records events and maintains history, what has been done by the borrower cannot be undone. That is in case there are defaults in payment of EMIs for a housing or car or personal loan though the loan itself would have been repaid fully/closed within the time frame and promptly in the end, the history of late payment of EMIs cannot be undone. It is, therefore, essential to pay EMIs promptly and to maintain constant good track record. The same yardstick applies to the credit card dues also.    

In case any incorrect reporting is found, one can always get it corrected by contacting CIBIL. CIBIL history or credit score may not alone be the basis for considering and sanctioning the credit facility/ies. However, good credit history leading to good credit score, among others ,will definitely be a ‘Gateway to a loan or credit facility’.

(The writer is Chief Manager (Retired), State Bank of Mysore)