Page 48 - Banking Finance August 2020

ARTICLE

In our country there are four companies registered with RBI 2. Outstanding debt
that provide credit information about the prospective 3. Length of credit history
borrower.
1. Credit information Bureau (India) Limited, 4. Number and types of credit accounts
5. Utilization of facilities and
2. Experian,
6. Application for new credit (enquiry)
3. Equifax and
4. CRIF High Mark. As mentioned earlier, CIBIL is one of the tool for conducting
proper due diligence and there is nothing like a good score
Among these, many Banks are using the credit score of Credit
or a bad score.
Information Bureau (India) Limited (CIBIL) which was founded
in the year 2000. CIBIL collects and maintains records of an Particulars Score range
individual's payments pertaining to loans and credit cards. The
records are updated on monthly basis by CIBIL. CIBIL report Credit history of more than 6 months 300 to 900
is one of the tool for exercising due diligence but not the only Credit history of less than 6 months 01 to 05
tool. CIBIL report gives the behavioral pattern of person No loan / No information / Insufficient - 01
regarding his commitment for repayment of dues on or before information
the due date. Credit history in the last 24 months will be
considered for arriving credit score. Usually, when the score is high score, it indicates that the
bank is prone for less risk by extending loan to such a person.
CIBIL score is one of the significant metrics that will be useful If the score is low, Bank is taking high risk in financing to
for lending institutions to measure a prospective borrower's such a person.
credit worthiness. A high CIBIL score denotes not only
excellent financial discipline of that person but also his Reading and interpretation of CIBIL
integrity. CIBIL score is generally considered as three digit report
numerical expression based on a level analysis of a person's
credit file to represent the creditworthiness of an individual. X It is very important to ensure all the details (Name, Date
The CIBIL score indicates the potential risk from the of birth, PAN number, Telephone number, E-mail
prospective borrower. Now-a-days, the CIBIL score is not address, Postal address) given in the application and
only limited to banks but also other organisations like mobile differences if any are properly compared and justified
network providers, insurance companies, P2P companies, with the details available in the CIBIL report.
commercial property landlords and government X Verify details of existing accounts that are shown in the
departments. CIBIL report and enquiries made by different lending
institutions about the prospective borrower.
There are two types of scoring provided by CIBIL X Number of loans availed by the prospective borrower,

1. Transunion score: Considering the repayment pattern amount sanctioned, present balance, repayment
of a person in respect of all loans i.e., secured and un- tenure, interest rate, status of account details are also
secured loans available in the CIBIL report
2. Personal loan score: Considering the repayment pattern X "Status" area should be always blank. Otherwise it may
of a person in respect of only personal loans i.e., un- contain phrases like, "settled" meaning settled under
secured loans OTS, willful defaulter, suit filed, written off etc. Such
accounts require additional due diligence
For arriving the three digit score, CIBIL consider
X Normally asset classification details are shown in
mainly the below mentioned six factor accounts where repayment of a loan is of EMI /
1. Payment history particular periodicity in nature like, STD - Standard

48 | 2020 | AUGUST | BANKING FINANCE