If you are a user of multiple credit cards or making delay in your payments, beware! Credit Information Bureau (India) Ltd is watching and rating your credit history. In an exclusive interview with Bijith R., Mr Arun Thukral, the managing director of CIBIL, spoke about the need for an individual to maintain financial discipline, how it impacts his credibility and how banks are increasingly looking at an individuals credit score while lending loans.

Excerpts:

When does an individual enter CIBIL records?
CIBIL captures the entire history of an individual, which is shared by the bank or credit grantor. So if an individual has taken a loan, then he beco-mes part of the credit bur-eau. And CIBIL captures the database on a monthly basis and brings out a comprehensive report. So far we have over 200 million records in the bureau.

How is an individual’s credit scorecard prepared and what does it indicate?
There are 258 variables built into an algorithm, which generates score in the band of 300 and 900. If your score is near 300, the possibility of you going delinquent or defaulting in one of your relationship is higher. If it is close to 900, the chances are less. The score is built on your history and captures key trends like your repayment and credit usage among others.
Let’s say, you have a credit card and you are supposed to repay the credit in 30 days. If you are paying on time, then your credit history is good. It is only when you delay your payment or goes delinquent in one of your relationship, the history gets bad and the score goes lower. The score also predicts the likelihood of an individual going delinquent over the next 12 months.

Which variable would have a major impact on the score?
The biggest weightage is the number of relationships that an individual have with various banks. Secondly, it looks at the number of secured loans (home loans, auto loans) and unsecured loans (credit cards or personal loans). If you have 10 credit cards, then your rating is lower. The ideal situation is when you are paying your dues on time and having a combination of secured and unsecured loan.

How can an individual improve his score?
Score is a dynamic number. It is not static and doesn’t stay at one place. You can improve your score through financial discipline by not seeking credit all the time. If you start paying all the bills and dues on time, your score will increase.

How much does bank rely on the score?
Banks have become conscious of their asset quality. Our analysis during the previous quarters indicated a shift in banks approach while lending. Earlier in 2009-10, 40 per cent of the home loan buyers had a score of over 800 points. In the current financial year, 57 per cent of home loan buyers have a score of over 800. Similar is the trend in auto loans. This indicates that banks are increasingly looking at credit scores.

How much is the public aware of this process?
Over the last six months, we have seen an upsurge in individuals asking for their credit reports before even approaching a bank for loans.

How easy is it for an individual to approach CIBIL and get his credit report?
Earlier an individual was required to send a hard copy of his identity proof along with attested copy, which we have done away with. We have now started a service called direct to consumer where you can directly take reports from us. We have an online authentication tool where you can access your score online by just three easy steps. First you will have to visit the CIBIL website and fill the online request form, make payment of `450 through the net banking and answer three questions, which will be based on your credit history. Once these questions are answered and the fees processed, the credit score along with credit report will be emailed it to you.

If there is an error on the CIBIL report, what can be done?
You can visit our website, where there is an online facility through which you can write to our customer relationship. We will take it up with the credit grantor and alter it accordingly when the next report is generated. However, the authority to change anything is with the credit grantor as they own the data and CIBIL is only the custodian. Normally these are done in 30 days.