TransUnion CIBIL Limited is India’s first Credit Information Company, also commonly referred to as a Credit Bureau. CIBIL and other Credit Information Companies like Equifax and Experian collect and maintain records of individuals’ and non-individuals’ (commercial entities) payments pertaining to loans and credit cards. These records are submitted to them by banks and other lenders on a monthly basis; using this information a Credit Information Report (CIR) and Credit Score is developed by the Credit Information Companies, enabling lenders to evaluate and approve loan applications. A Credit Bureau is licensed by the RBI and governed by the Credit Information Companies (Regulation) Act of 2005. A Credit Score or the CIBIL Score is a three-digit numeric summary of your credit history. The score is derived using the credit history found in the CIR. A CIR is an individual’s credit payment history across loan types and credit institutions over a period of time. A CIR does not contain details of your savings, investments or fixed deposits.
The Credit Scores developed by the Credit Information Companies like CIBIL, Equifax and Experian plays a critical role in the loan application process. After an applicant submits the loan application form to the lender, the lending institution first checks the credit score and credit report of the applicant. If the credit score is low, the lender may not even consider the application further and reject it at the first point. If the credit score is high, the lender will look into the application and consider other details to determine if the applicant is creditworthy or not. The credit score works as a first impression for the lender, the higher the score, the better are your chances of the loan being reviewed and approved. The decision to lend is solely dependent on the lender and CIBIL or other Credit Rating Agencies do not in any manner decide if the loan/credit card should be sanctioned or not.
Banks and Financial institutions ask for a guarantor for certain loans as a means of security for the loans sanctioned by them. A guarantor of any form of loan is equally responsible for ensuring the repayment of the loan. As per Law, the liability of the Guarantor is co-extensive with that of Principal Borrower. Hence, the guarantor provides a guarantee to the lender that he will honor the obligation in case the principal applicant is unable to do so. Any default on the payment of the loan by the principal will also affect your Credit Score of Guarantor as well.
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