India for a long time had an unorganized credit policy, which did not take into account a person’s credit history at any stage. However, in the recent decade the country has come a long way in its lending policies and many regulations have come to find a place in this turf now. Previously whenever an individual needed credit, his existing income documents were considered by the lending team for deciding on the loan amount. Today, the Reserve Bank of India (RBI), which is the regulatory authority of the banking industry in India, has made it compulsory for banks to do a mandatory credit check of every applicant before lending financial assistance of any sort.
Know your own credit rating
Awareness of your credit rating is crucial. Before obtaining credit of any sort, you should pull out your own credit report and check your score. The most common agency that is used by banks across is the Credit Information Bureau India limited, more popularly known as CIBIL. The CIBIL report shows the entire credit history of an individual. It reflects both the good and the bad credit usage of the individual, or in other words the creditworthiness of the applicant.
The report indicates a score – the higher the score the better are the chances of the applicant availing the credit.
Reading the report
The report will contain the individual’s last 5 correspondence addresses maintained by the banks. It will also contain other details like Pan Card (Personal account number issued by the Government of India) number, contact number, date of birth and a unique number called the CIBIL control number. This control number is unique to every search that is made.
The individual details are followed by the details of the credit issuer, the name of the bank, amount pending and the payment history of the loan or credit. This field will also reflect the delinquency string in case the customer was charged with any criminal offence in the past. Also the unpaid credit will reflect as “outstanding”. There are some terms which should draw your immediate attention, one of them being a ‘written off’ status – this indicates that the bank had written off the credit as bad debt. This reflects badly on the report as it means that there remains a full threat to lend any money to the individual as it has no certainty that it will be returned!
Making corrections if necessary
The good news is that in case you come across an adverse entry, you can choose to make changes in your report, which might involve you making a payment for any defaults visible in your credit report. It is actually best to resolve these errors at the onset, as with these showing up on credit reports, the possibilities of obtaining future credits become virtually impossible.
There are different channels through which you can escalate the issue and get a bank’s attention for making ratifications. It is important to note that CIBIL (Credit Information Bureau India limited) will make changes in your report only if the bank concerned makes the ratification from their side. If your bank is not co-operative to what you think is a genuine mistake, then you can approach the banking ombudsman for an effective solution. Remember that you need to provide your bank a time span of 30 days to revert to your initial complaint with them!
Building a good credit history in India is very important if you want to enjoy the innumerable loan facilities that are available today or get additional benefits on credit card issuance.