Few aspects of personal finance play as important a role in our financial health as credit. Virtually everyone of us uses it. Many people use it every day. While good credit can make our lives more convenient and organised, bad credit history will make lenders put you in the category of “most risky” as it will be difficult for them to trust you with any loan advance. Don’t be surprised if in future, the company you would have applied for job asks you for your credit score. Experts believe that your credit history is a reflection of your behavioral pattern and hence it is important to understand everything about it.
Whether you have repaid your EMIs/credit card payments on time or you paid it after the due date or you didn’t pay at all is part of your credit history. All these records go into making your Credit Information Report.
A lender will check your credit history through accessing your Credit Information Report or CIR. While on one hand it helps a lender differentiate between those who have honoured their obligations responsibly and those who have defaulted, on the other it helps the borrower to negotiate better with the lender if his credit history is good. Managing Director, Credit Information Bureau of India (CIBIL), Arun Thukral says, “Individuals who have appropriately manage their obligations build ‘reputational collateral’ with lenders. In turn, this reputational collateral allows individuals to negotiate better terms with a lender”.
Credit Information Report (CIR)
The use of CIRs is best illustrated with an example. You have a home loan with Bank A and a credit card with Bank B. Both Bank A and B have submitted your personal information and payment details to the credit bureau. Recently, you applied for an auto loan to Bank C. Upon receiving your application, Bank C will request Credit Bureau for your CIR so that it could assess how you have been paying your current dues and whether you will be able to manage the additional burden of another EMI. While the bank will request for your Form 16, savings account statements and other identification documents, the CIR has become an important tool in evaluating loan applications. Your asset details including your savings account, fixed deposits, mutual funds and stock investments do not get reported on your CIR.
There is no defaulters list which a credit bureau maintains. It