How to improve your CIBIL CIR ?

Your Credit Information Bureau (Cibil) credit information report (CIR), other than your income, is the single most important tool used by a lender to evaluate your application for any loan or credit card application. So, it’s important to understand how to improve your CIR, so that it is viewed favourably by lenders .Here are some basic rules to improve your CIR:

RULE 1

Always pay your bills on time. Late payments are viewed negatively by lenders and affect the chances of your loan getting approved. If you do not make payments on loans for more than 180 days, the lender may “Write Off ” the amount in question. The lender then proceeds to report this on your Cibil CIR. Moreover, in the event that you make a payment which is less than the amount the lender believes it is owed, the lender will report this as ‘settled’ to Cibil. For example, if the lender tells you that you owe it Rs 100 but you pay only Rs 80 to the lender, it will then report your account as ‘settled’ to Cibil. Both ‘write off ‘ and ‘settled’ accounts may be viewed negatively by lenders while evaluating your loan application because this status implies that you haven’t adequately repaid your lenders in the past.So think twice before postponing any debt repayments or negotiating for loan settlements with a bank.You may save money now but may be hard hit in future.In case of settlements in extraordinary circumstances negotiate with your bank specifically to ensure that the settlement doesn’t spoil your CIR.BTW these days mobile phone companies are reporting bill payment details to CIBIL.So paying phone bills in full on-time could improve your credit report.On the other hand late and non-payments might disqualify you for cheaper loans.

RULE 2

Keep your balances low. Most lenders review the total outstanding debt of a potential borrower (across all types of accounts ) and the amount of debt used in proportion to the amount of debt sanctioned to the borrower by the lender. While the balances on your loans will only reduce over time as payments are made, you must be diligent about controlling your credit card utilisation. For example, if your “Current Balance” is Rs 90,000 with a “High Credit” of Rs 1,00,000, this may be viewed negatively by a lender. While it is always prudent to not use too much credit, if you are already approaching the boundaries of your existing sanctioned amounts and credit limits the lender may be reluctant to provide additional loans to you.

RULE 3

Maintain a healthy mix of credit. Ensure your Cibil CIR  contains a mix of a home loan, auto loan and a couple of credit cards. A high number of just credit cards may affect the chances of a loan approval. Here is why. Although a credit card offers easy access to finance, it’s also by far the most expensive form of credit. The more the number of credit cards with high utilisation, the larger are the payments resulting from the high interest rate charged on credit cards. This may affect your ability to service additional debt obligations.

RULE 4

Apply for new credit in moderation. If you have made many applications for loans, or have recently been sanctioned new credit facilities, a lender is likely to view your application with caution. This ‘credit hungry’ behaviour indicates your debt burden is likely to, or has, increased and you are less capable of honouring any additional debt.

RULE 5

Think twice before closing credit card accounts. While using credit cards may negatively impact your Cibil CIR, unused credit cards actually imply that you are financially secure. This makes lenders view your application more favourably.

RULE 6

Monitor your co-signed and joint accounts monthly. In co-signed or jointly held accounts, you are held equally liable for missed payments. This is extremely important because your joint holder’s negligence could affect your ability to access credit when you need it.