Both of these things are issued by a credit bureau but they are very much different from each other and one should not confuse them. However, they are related to each other.
In respect to format
A credit score is just a three digit number that ranges from 300 to 900 and is a numerical representation of your credit-worthiness. It can be used to get a quick idea of your credit repayment history and other credit-related behaviours. The score is present in the credit report.
On the other hand, a credit information report is a comprehensive report like a document with all your credit-related activity mentioned in it. It contains details of your current loans, repayment history, all the applications you have made for credit card and loan, settled or written off accounts (if any), your frequency of hard enquiries.
A cibil credit score takes account only of your last 24 months. That includes recent activities and credit history.
On the other hand, the credit information report records your history for a time period of years. It usually takes more time to remove any negative remark from your credit report.
Your credit score has been calculated after so many statistical algorithms. There is a complex mathematical process indulged in concluding down to a single number.
A credit report is not a number, therefore, there are no calculations included in this. Rather it is a document with all your information related to credit.
FACTORS AFFECTING CREDIT SCORE
The most deciding factor is your repayment history; it is accountable for about 30% of your credit score. It’s very obvious as lenders are interested in customer’s ability to repay the borrowed money and they won’t have to settle for something less. If the customer has paid all the payments on time and in full amount, then his/her credit score will be good. Hereby are listed the other factors that impact your credit score.
Frequency of negative marks
There are a number of things that can be denoted in the negative mark, it could be foreclosure, account that yet needs collection due to defaults in repayments, ‘Written Off’ or ‘Settled’ status on previous loans. It holds great weightage in deciding your cibil credit score. A lot of negative marks would make your credit score poor, and restrict eligibility for loans. The significance of a negative mark is that it indicates your inability to properly manage the credit you have taken and warn your potential lenders. Erasing a negative mark from your credit history would take a lot of time.
There’s a direct relationship between your percentage of timely payments and credit score. More the number of timely payments, higher your credit score. As told above, your repayment history has the highest weightage among all. A customer with consistent repayment history is a reliable borrower and almost every lender will grant a loan to such customers. While on the other hand, even one or two late payments also have a bad impact on your credit score. The direct implication comes that you cannot be replied in such a case for timely payments. Thus, it is crucial to make payments on time for a good cibil credit score.
Your credit history length
This factor has relatively less importance than others but can give a much more detailed summary of your repayment history. Let’s consider two cases, first –you have been using a credit card for 10 years, second- you have recently started using a credit card for 2 years. In the first case, lenders have a darn long time to witness your credit behaviour and make a rational decision. While in the second case, the lender does not have sufficient information to make a judgment on your credit behaviour. Hence, you can see that it is not advised to drop using an older credit card. Older credit cards can improve your credit score.
Frequency of hard enquiries made
When you go to a lender for borrowing some money and the lender accesses your CIR for seeing if you are eligible for the loan or not, then it is called a hard enquiry. Even one hard enquiry may marginally drop your credit score. And if there are multiple hard enquiries without any loan being sanctioned, then it only means that you are ‘credit-hungry’. You are applying to as many lenders as you can for securing your chances. A large number of enquiries made in a short span of time can have a significant impact on your credit score.
IMPROVE YOUR CIBIL SCORE AFTER CREDIT CARD SETTLEMENT
What if you ever have to do a ‘settlement’ of your credit card? You will probably be worried about how you can fix your CIBIL score. There are ways by which you can turn around the situation but remember that there is no quick fix. It takes time and you have to be patient. You will need commitment, and discipline as well.
Below are the ways in which you can help your situation:
Turn ‘Settled’ to ‘Closed’ status
It is better to pay off your bill and change your status from ‘settled’ to ‘closed’. While you may think ‘settled’ means you have made the payment but it actually was not a full payment. Settled status will haunt every loan application you will make. Try to talk to your credit card company to agree on an acceptable amount that will let you convert the settled to ‘closed’ account. Make sure the amount is affordable. Your cibil credit score will significantly improve.
Make a vow to never delay payments and pay all outstanding amount
Any outstanding loan can have a bad impact on your credit score. Don’t think it is hard to pay off all the due, talking to your lender may bring both of you on a mutually acceptable amount. You should not wait a lot as interest is going to pile up, waiting will only increase your worries later. Also, when you delay the payments your credit score also drops. There is no benefit in holding up the payments.
Don’t stop the use of credit
When people get burned by their credit they stop using credit. It is no way a good idea. In order to rebuild your cibil credit score, the only thing that can help is your discipline in credit behaviour. The best way is to use less credit and make payments on time and in full.
Set a target score of at least 750. It has to take time and the time depends solely on your credit behaviour.
CIBIL stands for Credit Information Bureau (India) Limited. It is for the first time India has got a Credit Information Company or Credit Bureau. The primary work of this organization is to maintain all credit-related activities of many individuals and companies, comprising of loans and credit cards as well. All the registered member banks and other financial institutions send the reports to CIBIL in a specific period (usually per month). The data goes for analysis and on its basis, CIBIL issues a Credit Information Report or CIR (also known as a credit report) and a credit score.
In 2000, the foundation of CIBIL was laid for bringing making the credit space more efficient and transparent. CIBIL’s technical partners are TransUnion International (a renowned global credit bureau), and Dun & Bradstreet (another renowned global provider of credit information). CIBIL holds a mission and that is “To catalyze the growth of Credit in India through solutions that enable well-informed Credit decisions; technology that enables superior information availability; and people that provide high-quality services.” Moreover, CIBIL is an ISO 27001 rated organization that is the highest security standard on the globe.
TransUnion International, ICICI, SBI, IOB, HSBC, Union Bank of India, Bank of India, Bank of Baroda, and Allahabad Bank are the shareholders in CIBIL.
There are two areas where CIBIL focuses: One is the consumer bureau. It deals with consumers’ credit records. The other one is the commercial bureau. This deals with the records of companies and other institutions.
THINGS TO KEEP IN MIND ABOUT CIBIL AND CREDIT SCORE
CIBIL has an information base of about 250 million consumer trades and 8 million commercial trades. The database keeps on stretching as its 175 member base continues to add more and more information on the principle of reciprocity.
The idea to start CIBIL was to integrate all the existing consumer and commercial credit information and then put it in one place so it becomes easier to access it. Every individual and company could have several bank accounts and credits from a number of institutions. This piles up to be a big heap of data. CIBIL does the work of compiling every entity’s credit information for a quick reference.
A common misconception people have is that CIBIL has the name of defaulters only. That’s not true, every member of CIBIL’s network gives data of everyone be it a defaulter or an ardent customer. The data is used to calculate a credit score and the summary report is called the credit information report.
CIBIL score is important for your credit application, lenders shortlist you on the basis of it and then see your credit report for a comprehensive insight into your credit behaviour. If you are thinking about applying for a loan then check your score well in advance.