What Accounts Reflect in Your CIBIL Report?

We all know the importance of CIBIL Report of a credit report. However, we fail to understand what type of our transactions or accounts actually reflect in this report. Let us try to understand this aspect.

Mr. Arun Gupta, was a kind and noble man. Like any dotting parent he had made several plans for his daughter’s marriage. His dreams were shattered the day his loan application was rejected. It broke his heart when on the same day he found that his younger brother and another colleague had got a loan from the same bank. What was it that was hurting his credit aspirations? Something on his report may be.

What are the times when you turn to credit? Buying a home or a car, paying for higher education, marriage, etc. A hoard of such reasons can be listed. Your pockets become deeper once you avail any credit facility. It is obvious that credit helps you achieve your financial goals. But how would you feel if you were not able to meet these goals? Especially if you found out that people around you find no difficulty in seeking loans? Let us tell you. You will feel horrible and it is natural to feel so. Let that feeling pass and gear yourself up for course correction.

Statistically speaking, almost 79% of loanees are approved a loan if and only if their score is 750 or more. But what is noteworthy is that your score is just one aspect of your credit history. There is more in depth information recorded in your CIBIL report and this is the place where bankers look for a detailed background check. Here is a list of some accounts that reflect in your report and can distort a lender’s perception of you.

# Different types of credit accounts: You may have a lot of money lying in your savings account, current account & fixed deposits but it will not show on your CIBIL report to impress your lenders. However, inspite of maintaining high balances in your bank accounts if you have constantly defaulted on your loan and credit card payments then it will certainly shed a poor light on your financial character. Information on:

1. Loan accounts – All EMI based credit accounts are recorded in the report. You may have sought loan for education or a small personal loan, it will reflect in the credit report along with its monthly payment cycle.
2. Credit Cards – These are also short credit advances where the limit is restored every time a repayment is done. It is a revolving form of credit. Even if you have drawn any cash from this credit card, it will show on the report.
3. Secured and Unsecured Debt – Loans like car loans are secured debt and those like education loan are unsecured debt as they do not have a collateral backing them. For example, if you take loan against gold then the value of ornaments kept as collateral will also appear on the report.

The report also captures details like name of the lender, type of account, account number, ownership, date the account was opened and closed, account status along with accurate information amount due and paid.

# Settled & Written Off Accounts: Accounts that are settled for an amount less than what was due are shown as “settled” under the status column. Accounts that remain unpaid throughout the tenure are shown as “written off” after a period of almost 24 months.

The report is supposed to reflect your credit history. Such accounts have the potential to shatter your credit aspirations. You cannot have them removed from your credit history unless your lender is willing to co-operate and the likelihood of that happening is negligible. However, if it erroneously shows on your report, you can certainly raise a CIBIL dispute to have it corrected.

# Open and Closed accounts: Open accounts are those that are still running or in other words, those credit facilities that are currently in use. These accounts have a current repayment cycle and are still exercising a burden on your pocket.

Closed accounts are those that were in use at one point of time and now have been fully repaid. A “closed” account status favours your report and helps improve CIBIL score immensely. This is so because, it shows that you are a prudent user of credit, have repaid your lenders in the past and fully comprehend the business of credit.

# Jointly held loan accounts: It is not necessary that you have directly applied for a credit facility. It is possible that you are a co-applicant for a loan but are not directly responsible for making payments on this account. Yet, all such accounts reflect in your report too. This is because if the primary loanee defaults on repayments then the lender will turn to you for recovery and therefore it does feature as a risk you are exposed to.

# Accounts where you are a guarantor: You may have out of good faith ended up becoming a mere guarantor on a loan account. But these accounts feature in your credit report too. By becoming a guarantor you have promised the bank that you will make good all the losses a lender incurs owing to non-repayment of his dues. Thus, though you may not be using the credit facility at all, but since you have a risk of bearing the payments if not repaid, it adds to your debt burden.

# “Authorised User”: This shows the credit card where you are an add-on card user. Although you are not the primary card holder and are not directly responsible for the payments for charges on this card but in case of a default, you are required to make the payment good.

In short

All types of credit accounts, accounts that were previously used, whether settled or written off by the bank, currently in use loan accounts & credit cards and also accounts where you are either a co-applicant or a guarantor, details of all such accounts that project a debt burden on you, reflect in your report and are used for cibil score calculation. You must make utmost efforts to make sure that you have a clean report and one that is capable of impressing a lender.

Note-This is a guest post by Mr.Arun Ramamurthy, Director, Credit Sudhaar & author of Unlock the Power of Your Credit Score : India’s first book on Credit Scores’.

This is purely for knowledge sharing purpose. BasuNivesh in any way not associated Credit Sudhar or with Author of this post. Also, BasuNivesh not received any money to publish this post.

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