What is CIBIL Score and how to improve it?

What is a CIBIL Score and what factors affect my CIBIL Score?

CIBIL Score is a 3 digit numeric summary of your credit history, derived by using details
found in the 'Accounts' and 'Enquiries' sections on your CIBIL Report and ranges from 300 to
900. The closer your score is to 900, the higher are the chances of your loan application
getting approved.

How can I improve my CIBIL Score?

You can improve your CIBIL Score by maintaining a good credit history, which is essential
for loan approvals by lenders. Follow these 6 steps which will help you better your score:

1. Always pay your dues on time:

Late payments are viewed negatively by lenders.

2. Keep your balances low:

Always be prudent to not use too much credit, control your utilization.
 3. Maintain a healthy credit mix:

It is better to have a healthy mix of secured (such as home loan, auto loan) and
unsecured loans (such as personal loan, credit cards). Too many unsecured loans may
be viewed negatively.

4. Apply for new credit in moderation:

You don't want to reflect that you are continuously seeking excessive credit; apply for
new credit cautiously.

5. Monitor your co-signed, guaranteed and joint accounts monthly:

In co-signed, guaranteed or jointly held accounts, you are held equally liable for
missed payments. Your joint holder's (or the guaranteed individual) negligence could
affect your ability to access credit when you need it.

6. Review you credit history frequently throughout the year

Monitor your CIBIL Score and Report regularly to avoid unpleasant surprises in the
form of a rejected loan application.

How to read and interpret your Credit Information

Report?
How to read and interpret your Credit Information Report (CIR)

We are all familiar with the fear and anxiety that we feel when applying for a loan. After all,
it's the lender who decides whether we can own our dream home, our first car, or whether our
children can pursue higher education. In a nutshell, a better life depends on the lender's
decision.

We are unsure of the lender's criteria to evaluate our application. Is it the size of our income,
the number of assets (fixed deposits and investments), or is it our past performance regarding
payments with lenders we have a credit facility with? While other factors do play a part in the
lender's decision, our CIBIL Score plays a pivotal role. CIBIL Score is a 3 digit summary of
your CIR. Currently, almost all lenders access your CIBIL Score prior to approving loan
applications. Naturally, it's critical that you get a copy of your CIBIL Score and Report and
understand it well before applying for a loan.

So, what exactly does your CIR contain?

Personal Information

This section provides the lender your name, date of birth, gender, an identifier (such as PAN,
Voter ID or Passport Number, etc.). Go through this information to ensure that key identifiers
such as PAN or Passport Number is mentioned correctly.
Contact Information

Your addresses and telephone numbers are provided in this section. Up to 4 addresses are
provided on the CIBIL Report. Both the Personal and Contact information sections provide
details that indicate who the information on that CIR pertains to.

Employment Information

The employment section provides the lender with your monthly or annual income details as
reported by our Members. The reported income is generally one of the first figures reported
by a credit institution and not necessarily the updated one.

Account Information

This section contains the details of your credit facilities like name of the lender/s, the type of
credit facilities (home loan, auto loan, credit card etc.), the account number/s, whether single
or jointly held, when each account was opened, date of the last payment, loan amount, current
balance and most importantly, a month on month record of up to 3 years of your payments.
We will cover this more in detail below.

 Check your account details-This contains details such as the lenders name, account
number, account type (is it a credit card, personal loan etc), ownership
(single/joint/guarantor), date the account was opened/closed and the last date when
these details were reported to CIBIL. What to look out for is, if there are any details
reflecting in the account that is not factually correct or have never been applied for.
 Check status of the account- The status of the account is mentioned in the Account
Information section. Written off/settled/suit filed cases are not looked upon favorably
by the lender. It is always advisable to have a clean account status.
It is very important to understand the "Settled" and "Written off" terminology. Settled
means where there is partial payment (in consent with the lender) made against the
total outstanding. Once this is done that means there is no outstanding against your
name by that lender. You will notice your amount over due and current balance would
have changed to zero.
When one is not able to make payments against the outstanding loan/credit card
amount for more than 180 days, the lender is required to "write-off" the amount in
question. The lender then proceeds to report this on your CIR.
 Check dates-
It is better to have a healthy mix of secured (such as home loan, auto loan) and
unsecured loans (such as personal loan, credit cards). Too many unsecured loans may
be viewed negatively.
 Check your payment history (Days Past Due-DPD) for every loan or credit card
availed-The DPD indicates how many days a payment on that account is late that
month. Anything other than "000" or "STD" is considered negative by the lender.
Below are the types of asset classification that can appear in the DPD section:

DPD Denotes Explanation

STD Standard Payments are being made within 90 days
Special Mention Special account created for reporting standard account,
SMA
Account moving towards Sub-Standard
 SUB Sub-Standard Payments are being made after 90 days
The account has remained a Sub-Standard account for a
DBT Doubtful
period of 12 months
An account where loss has been identified and remains
LSS Loss
uncollectible

 On occasion you may also notice "XXX" reported for your DPD on a certain account
which implies that information for these months has not been reported to CIBIL by
the Banks.
If there is a number in the DPD column, then it means that the payment is late by that
many days. So for example if it is 050, then it means the payment is late by 50 days. If
it is 000 then it means the payment is as per the due date, so there is no deviation or
late payment.

Enquiry Information

This section provides details regarding loan applications you have made. An enquiry means
that a credit institution has requested your credit details from CIBIL. Lenders may tread with
caution considering your multiple enquiries in a short span of time, which shows a behaviour
of seeking excessive credit. The enquiries made are captured for a period of 7 years.