Your creditworthiness is represented by your CIBIL score, a three-digit number that normally ranges from 300 to 900. It is one of the most important factors that lenders take into account when deciding to accept your application for a credit card or loan. Knowing the guidelines and factors that determine your CIBIL score is essential for maintaining a healthy financial profile. Let’s discuss its main features and the latest legislation applicable to it.
What is a credit score?
Your creditworthiness is represented numerically by your credit score. This is determined using information from your credit report, which includes:
- Payment history: The timeliness of your bill payments.
- Credit utilization: It is the ratio between your credit utilization and your credit limit.
- Credit history: Length of credit history or period of credit usage.
The credit score allows lenders to set the loan terms, determine the interest rate and then grant or deny it.
CIBIL scoring guidelines
RBI (Reserve Bank of India) updated the CIBIL rules in April 2024, for greater transparency in credit management and to be consumer-friendly. In connection with this, the central bank has added another credit rule to the list. The main objectives of these rules are to maintain fair practices and inform consumers about their credit scores. Key changes include:
1. CIBIL update every two months: Banks and other financial organizations will now have to update their customers’ credit scores every 15 days from January 1, 2025. Credit information will now be updated on the fifteenth and last day of every month in the form of CIBIL scores to ensure it is current.
2. Credit Report Check Notifications: The RBI requires that you be notified whenever a bank or NBFC accesses your credit report. To ensure that you remain informed about who has access to your credit information, this information will be sent to you by email or text message.
3. Explicit reasons for rejection: This includes giving a reason if a lender denies your loan or credit card application. This gives consumers a better chance to understand and even resolve the reasons for credit denial. Banks and other lenders are required to provide consumers with a full account of the denial.
4. Free Full Credit Reports: Credit bureaus are mandated to provide free, detailed credit reports to consumers annually. Credit companies should also have a specific link on their websites where their customers can request their free report for easy access.
5. Standard Alerts: Lenders are expected to notify customers before filing a default case. All relevant information must be sent by loan providers via email or SMS. Moreover, nodal officers should be appointed by banks and other financial institutions to redress consumer complaints regarding payment defaults.
6. Story Timeline: A consumer complaint must be resolved within 30 days of filing with a credit reporting company. If the problem is not resolved within this period, the company will be penalized ₹100 per day until the case is resolved. The credit bureau may even have to compensate the customer for the nine-day wait after the bank adjustments.
In short, you can manage your credit better and avoid surprises by taking this into account. Your financial responsibility is reflected through your score in CIBIL as more than just a number. Once you have a high score, you can get better credit cards, loan plans, and even better job opportunities. Knowing the rules of CIBIL scoring will protect your financial security and help you make more informed decisions when it comes to credit.
