November 10, 2024 · 11 mins read
Santosh Kumar
If you are the one who uses credit products to meet your financial needs, then you might have heard the words "credit score" and "credit report". But do you know how important these words are in the modern world? Apart from the financial field, where credit scores and reports are considered for making lending decisions, these buzzwords are much more important. Whether you are an experienced credit user or a newbie, this blog is for you to understand what CIBIL credit scores and CIBIL reports are and why CIBIL scores/reports are important.
CIBIL, or TransUnion, is one of India's four popular credit bureaus. Many recognised banks, financial institutions and lenders report the credit behaviour of their customers, both individual and commercial borrowers, to the CIBIL. CIBIL credit report or credit information report (CIR)is a detailed report that summarises your financial activities like the credit products you have used, payment behaviour, any suits filed against you by any lender and many more, along with your personal details like name, address, phone number, employment details and so on.
CIBIL generates credit reports for companies and business entities, too. The CIBIL company credit report (CCR) is a report that is intended for companies and business entities. This report includes the summary of the loan and payment details of the company along with the payment history to various suppliers if the supplier reports to the CIBIL credit bureau. It also includes the basic details of the company.
A credit score is the most important attribute in an individual's credit report. Based on your payment behaviour and other credit-related activities, a credit score that ranges from 300 to 900 is given to you, which forms the main deciding factor for lenders to decide whether or not to approve your new credit product application.
Credit rank is a score given to business entities to evaluate their financial responsibility. The score ranges from 1 to 10, with 1 being the best. Lenders, suppliers and partners refer to this rank to evaluate your company’s creditworthiness.
Apart from the credit score or credit rank, the credit report includes the below-said details. While credit score just gives a number value for your financial reliability, this information in the credit report clearly shows how good or bad you are at repaying the debts, how many days you delay the payments and so on. Let's get deeper into the details of the credit report.
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1. Personal Information: This section includes details such as your name, date of birth, gender and IDs such as PAN, passport number, voter's number, etc. The credit report will update the details you have presented to the lenders or banks while availing credit products.
2. Contact Information: Details like address and phone numbers and a maximum of 4 addresses that you have provided to various lenders will be available in this section.
3. Employment Information: Your employment and monthly or annual income details that are presented to the lenders while applying for each credit product will be updated in this section.
4. Account Information: This includes the name of lenders, type of credit facilities availed, account numbers, date opened, date of last payment, loan amount, current balance and payment history. The payment details are recorded on a month-on-month basis, and only records of up to 3 years will be available in the credit report.
5. Enquiry Information: This is yet another important section in the credit report that records every instance of hard inquiry done by every bank or financial institution. A hard inquiry is when lenders access your credit report when you apply for any new credit product.
Read More:: CIBIL Score Role in Loan Application Process
1. Background Information: This section includes the business’s background information like ownership, company type, years of operation, parent company details and subsidiary companies.
2. Financial Information: Details of your credit accounts, along with the credit limits, will be available in the credit report.
3. Financial History: The detailed report of the repayments, outstanding debts, collections, revenue generation, and such financial activities of the company is available in the credit report that gives further insights into the financial health of your company.
4. Public Records: The report also includes the bankruptcies, liens and judgements related to your company.
Read More:: How Students with No Income Can Get a Credit Card
Credit score and credit report is a proof of your creditworthiness and will benefit you in a number of ways.
Banks and lenders cannot personally verify your repayment behaviour and hence depend upon the credit score and report provided by CIBIL or other credit bureaus to evaluate your financial reliability. Thus, a good CIBIL score and a credit history will help you ease your loan approval process.
We all know that a CIBIL score greater than 650 is considered a good score, and banks will be ready to offer you loans without collateral. But, do you know that if you have a CIBIL score greater than 750, lenders will be ready to avail loans at better interest rates? With an excellent score, you can even negotiate for larger loan amounts, better interest rates, or tenure, and the lender is more likely to accept it.
A credit score is calculated based on your payment history. If there is wrong information in your credit report or the payment details are not updated, you may have a decreased credit score value. How can you avoid that? Check your credit report frequently to analyse whether all the details are correctly updated to stay away from such mishaps. If you find anything wrong or suspicious, report it immediately to the credit bureau to get it corrected as early as possible.
The credit score is not a stable score. It keeps on changing based on how frequently your credit activities get updated, usually every month. By frequently checking your credit score, you can verify whether you are on a safer credit limit to stay future-ready for availing any credit product.
The credit score is not just a measuring scale to decide the credit product approval. Sometimes, you may land good jobs in finance if your CIBIL score is good or excellent. Yes, suppose an employer is looking for new candidates to handle cash and account tasks of his/her company. In that case, there is no doubt the choice would be a financially responsible and reliable candidate. In such cases, employers can check the candidates' credit scores to evaluate the creditability of the candidates they choose.
Renting a premises to someone is like lending money, right? If you are unsure how the person will pay the rent, you may be at risk. So, some landlords check the credit score to evaluate the creditability of the tenants before renting their premises.
Read More:: Is 720 a Good CIBIL Score?
Like individual credit reports, the company credit report is useful to company owners in multiple ways.
Lenders check the credit rank and the company's payment history for loan approval decisions. So, with a good credit score and a timely payment report, you are ready to avail of business loans easily. With a good score, you are a step ahead to get lower interest rates.
Like lenders, insurance firms also analyse a company's risk factors to determine the coverage options. Insurance firms will consider a company with no or fewer defaults and fewer claims trustworthy. You can get the best plans with a good payment history and financial history.
It is common practice to research the company's background and financial health before entering into partnership deals. Company credit reports thus help investors and companies evaluate the reliability of other companies with whom they wish to make business deals. With a good score and a good credit report, it is evident that a partnership with your company would be a great deal. So, companies or individuals may confidently come forward to make a business partnership if your credit rank is good or reject your business deal if your credit report is not satisfactory. On the other hand, before entering into a partnership with another company, you can check their credit report so that you will be financially safe.
With credit reports in place, suppliers can decide whether to rely on the customer for payment after delivery. If your company has a good CIBIL credit rank, then the supplier may be ready to deliver products for higher amounts without or at lower advance payment. On the whole, you will get raw materials at better payment terms if you have a good CIBIL credit rank for your company.
If you are a supplier, you can decide your clients' payment terms and maximum due amounts based on their company credit rank.
Whether you are presenting a new project to the investors for funds or entering into a business deal with a supplier or a client, it becomes necessary that the investor, supplier, client or customer should have a good impression of your company and the product or service that you offer. If your company has a good credit history, it will serve as a backbone to prove your company's financial health.
Checking your own company credit report is a must-do and should be done frequently to check for any wrong information in the report and verify your company's credit rank. If you find any details wrongly updated, you can report to the CIBIL credit bureau to fix the issue as early as possible. Also, if the credit rank of your company is high, you can take immediate steps to bring it down as much as possible.
In business, we often have to do detailed research about our competitors to decide offers, plan the future development of our business and much more. The credit report of your competitor will give you insights into the financial stability of your competitor. Since company credit reports can be checked by anyone and need no permissions, it is easy to keep an eye on your competitor's growth.
Read More:: What is the Use of CIBIL Score?
CIBIL credit report is an important tool that is relied on by many lenders, suppliers, insurance firms, landlords, employers and businesses to make lending decisions and to check the financial stability of businesses. Whether you are an individual or a company owner, register in the CIBIL credit bureau with the appropriate plan to check your credit report and credit score/rank to analyse how creditworthy you are from the view of lenders. You can take steps to improve if the score drops and correct any mistakes in the credit report to stay future-ready for loans and credit products.
Are credit score and credit rank the same?
A credit score is for individuals, and a credit rank is for companies. Credit score ranges from 300 to 900, with 900 being the best, while credit rank ranges from 1 to 10, with 1 being the best.
Why are the details of one of my loans not available in the CIBIL credit report?
Not all lenders, banks or financial institutions report to all the credit bureaus. That particular lender may not be reporting to the CIBIL. But, if your loan payment for just one or a few months is not updated, raise a dispute with the credit bureau to fix that.
Why do credit details for which I am not primarily responsible show up in my credit report? If you are collateral or guarantor for a loan, then the payment details will be applicable for both the primary borrower as well as you. This applies to add-on credit cards, too.
Can I access my business's CIBIL Rank and Company Credit Report without GSTIN?
Yes, you can. You can opt for uploading documents instead of GSTIN to complete the registration process. Once registered, you can check your company's CIBIL rank and credit report.
Can I check my competitor’s credit report?
Yes, you can. Company credit reports don't require any permission.
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