What is the Credit Information Bureau (CIB)?

The credit information bureau in India is licensed by the Reserve Bank of India and is governed by the CICR Act 2005.

Data collected from banks and other financial institutions are maintained in the Credit Bureau to track the credit behavior of consumers and companies. This data helps in assessing their credit reputation while lending them money.

The lending institution from where you have taken a loan or credit card, reports data related to your borrowings, payment history, regularity in payment, etc. to a credit bureau. This data is reported every month and the same gets updated in the database of the credit bureau. Based on this data, the credit bureau calculates your credit information report (CIR) and credit score. This report primarily consists of information related to the loans you have taken, your credit card spending, monthly payment track records, and outstanding amounts across different banks and financial institutions.

When you approach a lending institution for loans, that institution refers to your CIR or credit score and assesses your credibility and worth for the amount you have asked to borrow.

Credit Information bureaus maintain a repository of credit information of individual borrowers, offer comprehensive risk management tools, and provide lenders with portfolio reviews of borrowers that help them study a borrower’s behaviour and past or existing relationships with multiple lenders. In India, four prominent Credit Information Companies generate credit scores for individuals and credit ranks for companies or businesses. These four authorised credit bureaus from RBI are TransUnion CIBIL, Experian, Equifax, and CRIF High Mark.
They generate a three-digit credit score and credit report after evaluating your credit history. Credit scores usually help determine the creditworthiness of individuals and are calculated based on the credit history found in the credit report.
It is considered that the higher the scores in the report, the chances of default is less. Generally, most of the banks accept a CIBIL TransUnion score of 750 and above level good for lending in the earlier version of scoring). Scores in the range of 300 to 600 are always considered being a risky proposal by the lender, as it indicates the past credit history of the borrower is bad. Since the chances of default are higher, in most cases, the credit proposals received from such borrowers are rejected by financial institutions without further process. However, the cut-off credit scoring for eligibility for loans may vary from bank to bank depending upon the individual bank’s loan policy.

Credit Information Bureau (India) Limited (CIBIL), India’s first Credit Information Bureau was established by the Reserve Bank of India. It collates credit information contributed by its members and disseminates it to lenders, helping them in their credit decision-making and lending process.

Commercial entities get commercial credit reports from CIBIL, which is similar to CIR for individuals. It consists of all information, included in CIR, along with additional details about the commercial entity like legal constitution, registration number, etc.

To know how the credit score is calculated  click credit score

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