Spending It!

Credit Score is a relatively new term in India after the CIBIL (Credit Information Bureau India Limited) came into effect in 2000 and it is catching up fast. CIBIL - India's first credit information bureau contains the credit history of commercial and consumer borrowers.

A Credit Information Report (CIR) is a factual record of a borrower's credit payment history compiled from information received from different credit grantors. Its purpose is to help credit grantors make informed lending decisions - quickly and objectively.

The CIR includes the following information:

• Basic borrower information like:
  1. Name
  2. Address
     In case of individuals:
  3. Identification numbers
  4. Passport ID
  5. Voters ID
  6. Date of birth
     In case of non-individuals
  7. D-U-N-S^® Number
  8. Registration Number
  9. Legal Constitution
• Records of all the credit facilities availed by the borrower
• Past payment history
• Amount overdue
• Number of inquiries made on that borrower, by different Members
• Suit-filed status.

Why is it important?

It is important for both - the borrower and the lender. It will provide borrowers with fast and easy access to the lending resources they need. The use of CIRs will enable loan officers to make objective and informed credit decisions quickly and cost-effectively. This would result in lower cost to the lender and a part of these reduce costs will be passed to consumers with good credit performance in the form of lower interest rates. How do I improve it?

In order to ensure a good credit history, it is important to re-pay your loans on time. Financial discipline coupled with prudent credit management and a good payment history will ensure that you enjoy all the benefits associated with having a good credit record-

• Making your payments on time will have the most significant impact on your credit record. It is important for you to maintain appropriate, reasonable and affordable levels of credit and ensure regular and timely re-payment of loans.
• Keep your total debt under control. If your total borrowings are significantly high, use some of your savings to repay some of your debt.
• When you are seeking for a new loan or credit card, do it in a relatively short amount of time. You don’t want to have your report show that you are constantly looking for credit!

You can access your CIR report- Log on http://www.cibil.com/accesscredit.htm for more details.

Ten things you must never do:

1. Make a late payment

2. Pay only the “Minimum Amount Due”

3. Applying for new loans/ cards if you already have existing ones with a lot of debt

4. If there’s a late payment/ incorrect entry on the card, ignore it

5. Leave old outstanding amounts as it is

6. Not checking your credit limits

7. Using Multiple Credit Cards and not tracking them

8. Spend even while you are in the RED zone (negative cashflow)

9. Pay for today’s expenses with future incomes’ expectations

10. Carry forward loans from one card to another

The author Lovaii Navlakhi is a Certified Financial Planner and Managing Director of International Money Matters Pvt. Ltd.