Credit information companies (CICs) are independent, third-party organisations that collect financial data regarding loans and credit cards and share it with their members in a comprehensive manner. Individuals also can easily obtain own credit report, including credit score and history by paying certain amount to any of the four CICs in India. There are four CICs, TransUnion CIBIL Ltd (CIBIL), Experian India, Equifax Credit Information Services Pvt Ltd (Equifax), and CRIF High Mark Credit Information Services.
Financial institutes like banks, and non-banking financial companies (NBFCs) are members-subscribers of CICs. Credit information companies collect information about all borrowers from financial institutes and then convert this in a report detailing credit history of the borrower.
A credit report contains information in sections, like personal information, accounts (held by the entity), and enquiries performed (for obtaining credit). However, this credit information report does not show information like savings account, transactions details on credit or debit cards, investments such as mutual funds, stocks or insurance and utility payment details.
Credit score is a three-digit number generated by CICs, in the range of 300 to 900, with 900 being the best. This score decides whether you will get a loan and at what interest rate. Everything like a credit card or a home loan is dependent on your credit score and, hence, it is imperative that the scores are calculated and reported correctly.
Now let us see what is a credit report from CIBIL and how to read and understand it.
The CIBIL credit report is divided into six sections, CIBIL score, personal information, contact information, employment information, account information, and inquiry information.
All six sections (as detailed below) play different roles and are equally important.
1) CIBIL Score: Credit score is a three-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. While there is no fixed criteria, generally CIBIL considers a credit score of above 765 in green zone or where the individual can be considered as good borrower.
Contrary to myths, a CIBIL score of not-available (NA) or no history (NH) is not a bad thing at all. This can mean any one of three things:
a) You do not have a credit history or you do not have enough of a credit history to be scored i.e., you are new to the credit system.
b) You have had no credit activity in the last couple of years.
c) You have all add-on credit cards and have no credit exposure.
2) Personal Information: This section contains your personal details such as name, birth date and gender as reported to CIBIL by various members. Identification type section contains details like your permanent account number (PAN), passport number, driving licence number and voter ID information as reported by lenders. It is a common misunderstanding to think that personal information is not related to financial information. But, personal information collected by CIBIL is proof of accurate and genuine information. It helps banks and financial institutions verify the client’s data with the provided one. The data collected from previous loan lenders is marked with an ‘e’ to prove its accuracy.
3) Contact Information: Your addresses (home, work, temporary and permanent), telephone, mobile numbers and email ids as reported by lenders appear here. The address category also explains whether the address is a residential address, official address, permanent address or temporary address. Up to four addresses and email addresses are provided in this section. This is another proof of the genuine identity of an individual.
4) Employment Information: Employment information contains the data of all the jobs and companies a person has worked in. They check their records at those companies, and how frequently they have switched jobs. This helps the lender understand the income pattern of the client. Anyone who changes jobs frequently has a low chance of getting a loan because of continuous income changes. Monthly or annual income details as reported by the members (banks and financial institutions).
5) Account Information: This is one of the most important sections of a credit report. The section contains details of all your previous and ongoing loans and credit cards. It also contains information about how frequently does the person make repayments and if he or she has missed any dates. The account information also holds the bank account details of the person. The section comprises of a table with columns such as the name of the lender, type of credit facility, account number, type of ownership, the date of opening the account, the date of last payment, loan amount, outstanding balance, and a month-on-month record of the last 36 months of payment. In addition, the days past due (DPD), i.e., the number of days the payment on an account is due, will be mentioned. The most favourable value for this column can be ‘000’ or ‘STD’; all other values are considered a negative indicator. ‘XXX’ implies that there is no payment information received for the corresponding months by CIBIL. Similarly, ‘060’ implies the payment is due by 60 days late. The possible values can be:
o Standard (STD): For payments made within 90 days.
o Sub-Standard (SUB): For payments made after 90 days.
o Special Mention Account (SMA): A special account to report a Standard Account moving towards Sub-Standard.
o Doubtful (DBT): The account has remained SUB for 12 months.
o LOSS (LSS): It determines an account where loss is identified but not recovered.
€ Red Box: Sometimes, you can find a red box placed above the ‘account details’ table (as shown in the sample report below). If there are disputes associated with the account information, the red box will appear with the text stating the fields that are under dispute. The box will be removed once the dispute is closed. There may or may not be any change in the information based on the lender’s input on the dispute.
6) Enquiry Information: Enquiry information section includes information about the recent enquiries made by lenders corresponding to the credit applications made. Every time you apply for a credit facility, the lender enquires about your credit history and this enquiry is recorded. The section includes the lender’s name, type of loan applied for, size of the loan, and date of application.
Common terms you need to know while analysing your credit report
€ DPD (Days Past Due): Days past due means the days that have passed since the due date for repayment. It is very important to avoid numbers in this column as it leaves a bad impression. Ideally one should try to keep it zero.
€ CN (Control Number): A control number is a nine-digit number that acts as a reference to the credit report. In case a person has any doubts related to his or her credit report, he or she can consult CIBIL with this number.
€ Settlement Amount: Sometimes, there are situations when the lender and the client get in a payment dispute. In such cases, the lender and the client come up with an agreement to pay a final amount that is less than the loan amount called the settlement amount.
€ Written Off Amount: When the client and the lender decide on a settlement amount, the leftover amount is known as the written off amount.
€ NPA (Non-Performing Asset): The payments that are pending over 90 days are termed as NPA.
€ Amount Overdue: This indicates the total amount that has not been paid to the lender in timely fashion (includes principal and interest amount).
€ High Credit: This applies to credit cards/ overdrafts and reflects the highest amount ever billed (including interest and fees) for that credit card or overdraft.
€ Written Off and Settled Status: If this section is populated, the lender has either restructured your loan by offering you different terms (extended the loan tenure or reduced the interest rate etc), written off this amount or settled at some amount less that what the lender believes it was owed. The possible values are:
A) Restructured loan B) Restructured loan (government mandated) C)Written-off (WO) D) Settled E) Post (WO) Settled