This post is written byÂ Shiv Kukreja
You know how increasingly critical your credit score is becoming these days. Nowadays, even oneâ€™s employment prospects could be affected by this score as the employers have started asking prospective candidates to submit their credit information report (CIR) during the interview process and a few candidates get rejected due to their poor credit history.
A few days back a friend of mine told me about this case in which a senior level MBA was refused employment in a bank because of his poor credit history. The employer came to know about a credit card payment default by this guy while carrying out his background check. I think time is not very far away when one would be required to upload these reports on matrimonial sites to find a suitable match or even during school admissions of their children.
What is a CIBIL Credit Information Report (CIR) and what is its significance?
A CIBIL Credit Information Report (CIR) is a record of oneâ€™s credit payment history compiled from information provided by the lenders such as banks and financial institutions. It provides details about oneâ€™s basic information, details about all the credit facilities availed, past payment history, amount overdue, current status, inquiries made etc.
Critical attributes ofÂ your Credit Information Report:
Payment History –Â This section of the report shows your history of payments for a period of 36 months against the loan(s) taken or credit card dues. Days Past Due or DPD tells a lender by how many days the payment was late after the â€œdue date of paymentâ€.
Current Outstanding BalancesÂ – This section of the report shows the current outstanding balances on all the loans taken by you and accordingly helps the lender to determine your strength to take on additional EMIs in relation to your current income. Naturally, lower the current outstanding balances, the better the chance of your loan getting approved.
New Credit FacilitiesÂ – This section of the report shows all the credit facilities that have been sanctioned to you in the recent past, as a result of which the proportion of the monthly outflow against your monthly income must have increased and it is a negative factor from the lenderâ€™s point of view.
New InquiriesÂ – This section of the report shows all of the inquiries that have been made in the recent past by the lenders regarding your loan applications. So, a higher no. of inquiries indicates an urgent need of money on your part and hence a lower credit score.
Here is a Sample Credit Information Report and we try to make you understand what is there inside this report.
Understanding the terms of a Credit Information Report:
Sanctioned Amount:Â This is the loan amount disbursed by a lender to a borrower.
Current Balance:Â This is the outstanding amount a borrower still owes on a particular credit facility. Lenders typically take 30-45 days after the payment is received to update it with CIBIL.
EMI Amount:Â Equated Monthly Installment that a borrower pays on the sanctioned loan.
Actual Payment Amount:Â This is the amount a borrower has actually paid against the due amount or EMI. If it is a loan, this amount may be more or less than the EMI Amount.
Amount Overdue:Â This is the amount that has not been paid against the due amount.
Repayment Tenure:Â It is the term of the loan.
Collateral:Â An asset like property, shares, gold etc. which has been provided to a lender as a security to protect the lender in the event of a loan default.
Credit Limit:Â Amount of credit available in case of credit card or overdraft facility.
Cash Limit:Â Amount of cash one can withdraw with the credit card.
High Credit:Â Highest amount ever billed against a credit card or overdraft facility.
Days Past Due (or DPD):Â DPD suggests the no. of days a due payment was late after the â€œdue date of paymentâ€. If it is â€œXXXâ€, then DPD was not reported by the lender.
Asset Classification (or AC):Â These are types of DPD based on RBIâ€™s Asset Classification Â Â Â Â norms.
STD – StandardÂ – Payments made within 90 days after the due date. After 90 days, it is termed as a Non-Performing Asset (NPA).
SMA – Special Mention Account –Â Special account created for reporting Standard account, moving towards Sub-Standard.
SUB – Sub-Standard –Â An account which has remained an NPA for up to 12 months.
DBT – Doubtful –Â An account which has remained an NPA for a period of 12 months.
LSS – Loss –Â An account where loss has been identified and remains uncollectible.
Enquiry:Â Enquiries are added to oneâ€™s report everytime a lender decides to access the borrowerâ€™s CIR.
Control Number (or CN):Â This is a unique number of every Credit Information Report (CIR).
OwnershipÂ – Responsibility of Payments:
SingleÂ – A single borrower is solely responsible for making payments against the credit.
JointÂ – More than a single borrower jointly responsible for making payments against the credit. This will also reflect on the other individual(s) CIR.
GuarantorÂ – A guarantor pledges to repay a loan on behalf of a third party who has taken the loan.
Authorised User – This is used for â€˜add-onâ€™ credit cards. An authorised user can use the add-on credit card but he is not responsible for paying the dues.
Written-Off and Settled Status:Â If the lender has either restructured a loan or has written it off or has settled it at some amount less than what the lender believes it was owed, then this section would be seen as populated in the report.
Written-Off Amount (Total):Â This field reflects the total loan amount written-off by the lender.
Written-Off Amount (Principal):Â This field reflects the principal amount written-off by the lender.
Settlement Amount:Â This is the amount that the borrower has agreed to pay and the lender has agreed to settle the claim against the amount due. The rest of the amount is written-off by the lender.
Suit filed/Wilful Default:Â In case the lender has filed a suit against a borrower, the lender has to report it as per the RBI guidelines as one of the following: 1) No Suit Filed 2) Suit Filed 3) Wilful Default 4) Suit Filed (Wilful Default).
CIR provide lenders the ability to differentiate between those who have honored their obligations responsibly and those who have defaulted. Individuals who appropriately manage their obligations build a reputational collateral with the lenders. In turn, this reputational collateral allows them to negotiate better terms with a lender.
Hence, whenever you decide to start your loan hunt, it is advisable to purchase and review your CIR. It helps you understand what the lender will review while evaluating your application. So, you have time to identify the discrepancies that you may find on your CIR and get them rectified on time in order to prevent any problems during the loan evaluation process.