How to read CIBIL Score and Risk Index is one of the most common query from my readers. In layman terms CIBIL Score is nothing but risk assessment / credit worthiness of a potential borrower based on past credit history. Though CIBIL Score and Risk Index is the 1st level shortlisting criterion by the Mortgage Lender. Executives of financial institutions who have access to this data are not competent enough to explain the CIBIL Score / risk index to borrowers. It create panic situation among borrowers. Recently one of my client called me and told that his consumer loan is rejected because his CIBIL Score is very low. I checked with him, what is his CIBIL Score. He told me that his CIBIL Score is 2. Unfortunately 2 is not a CIBIL Score but Risk Index. Worst part is that executive of financial institution referred him to some shady online agency, Which charged Rs 10,000 to Improve CIBIL Score. I explained him that currently his credit history is less than 6 months therefore Risk Index is returned by the CIBIL database which is 2 i.e. High Risk customer. Once the credit history is more than 6 months, he will get CIBIL Score between 300-900 instead of Risk Index between 1 to 5. After 2 months, his CIBIL Score was 670 and agency sent him a long self-congratulatory letter mentioning that they helped him to increase CIBIL Score (Read Risk Index) from 2 to 670. Now he wish to further increase his CIBIL Score from 670 to 750, he has to pay Rs 10,000 more.
How to read CIBIL Score and Risk Index?
CIBIL basically divide all Individuals / potential borrowers into following 3 categories. We will understand CIBIL Score / Risk Index in each category separately.
(a) Individuals with either No Credit History or Credit History not reported to CIBIL.
(b) Individuals with less than 6 months Credit History
(c) Individuals with more than 6 months Credit History in last 2 years
CIBIL Score / Risk Index returned for each of the above mentioned category of potential borrowers is different. Lets check out how to read
(a) Individuals with either No Credit History or Credit History not reported to CIBIL:
In this category, the index returned is either NA (Not Available)or NH (No History). What it implies is that individual has No credit history and / or Credit History is not reported to CIBIL by the financial institution. Let me clarify that NA or NH cannot be classified as low score or poor credit history. It simply means there is no credit activity registered or reported. Now one of my client whose CIBIL index was NA, asked me if NA or NH is not viewed negatively by the financial institution then why her Home Loan was rejected. Answer is very simple, some financial institutions have policy not to lend with NA or NH index. In short, in the absence of risk index / CIBIL Score financial institution has no criterion to check risk assessment.
(b) Individuals with less than 6 months Credit History
In this category, CIBIL return Risk Index between 1 to 5 therefore as i explained in above mentioned example that 2 is not a CIBIL Score but risk index of the potential borrower. Lets check how to read Risk index between 1 to 5
High Risk: Index of 1 and 2
Medium Risk: Index of 3
Low Risk: Index of 4 and 5
In my clients case, the loan was rejected because of high risk index of 2. To maintain good CIBIL score, it is advisable to follow good credit practices from the beginning. I observed that most of the Low CIBIL Score cases handled by me were outcome of ignorance of a borrower initially. I always advocate that banks should appoint qualified Credit Counselors instead of executives with not even bare operational knowledge.
(c) Individuals with more than 6 months Credit History in last 2 years
In this category CIBIL Score is returned i.e. value between 300 to 900. Higher the CIBIL score, lower the risk and vice versa. As i keep highlighting that high credit score does not guarantee sure shot loan / mortgage. CIBIL Score depend on 70 parameters to arrive at your CIBIL Score. It is critical to find out parameters which are impacting CIBIL Score negatively. CIBIL Score can be linked to credit worthiness of an individual. Lets check credit worthiness
Score between 300 to 600: Very Poor
Score between 600 to 700: OK
Score between 700 to 775: Good
Score of more than 775: Marvelous
Normally people have tendency to compare CIBIL Score / Risk Index. Sometime back, one of my blog reader was quite furious as bank A rejected his Home Loan with CIBIL Score of 760 and approved his friends Home Loan with CIBIL Score of 730. When i checked his CIBIL Report, i found that his credit utilization was high therefore any comparison is non-standard.
Let me admit that Banks and financial institutions are quite proactive in reporting defaults by customer. whereas they skip reporting of good credit practices of customer. One of the most common casualty is Secured Credit Card. In most of the cases, secured credit card details are not reported to CIBIL by the banks. It defeats the whole purpose behind secured credit card. Most of the people opt for this credit card to improve their CIBIL Score or Risk Index. If it is not reported then you should immediately bring it to the notice of a bank.
Lastly, as i always request that before applying for any loan or mortgage you should check your CIBIL Score / Risk Index to avoid any future shocks. You can take all corrective steps to improve your CIBIL Score / Risk Index in advance. Its a misconception that your CIBIL score is impacted if you check your CIBIL Score. Fact of the matter is that you can check your CIBIL Score as many times as you can. It will not impact your CIBIL score negatively. You can pull out your CIBIL Report online. Click Here to get your online CIBIL Report.
To summarize, It is always advisable to understand the CIBIL Report before arriving at any conclusion. If your loan is rejected you have right to know the reason for rejection. Blanket answer from financial institutions that “Your CIBIL Score is LOW” should be supported by logical reasoning. High Risk Index is not the end of the road. You can always improve your CIBIL Score with good credit practices.
CLICK HERE if you wish to avail personalized consultation to improve your CIBIL Score.
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I owned ABN Amro credit card way back in 2004. In Jul 2005 I had some outstanding amount with late fees of some Rs. 1200. I called up customer care to request them to waive off my late fees. They told me that it has been waived off and you proceed with deposit of the principal amount. I had deposited entire balance amount and then called them up to close my credit card.
They told me that my request has been taken and it will be closed in next 3-4 working days. However I got a call recently few days back in March 2015 from that I had balance amount of Rs. 1200 and which has now become 3700 Rs with late fee and other charges including membership renewal charges.
I told them about the conversation that I had at that time. They said they are not aware of anything and asked me to deposit the entire amount or they will report this to CIBIL and ruin my credit history.
I am in a fix as what to do now. Can you please assist me with this?
Have you received any NOC from bank in year 2005.
No I didn’t received any NOC.
Unfortunately without NOC you cannot prove that credit card dues were cleared and was closed.
Can they still report this 10 year old transaction to CIBIL? How many years of transaction CIBIL accepts from bank?
It depends on case to case basis. Secondly whether limitation period is over or not. Bank may report to CIBIL
I have a CIBIL Transunion score of 629. Whereas the bank for a CIBIL Score v2 of 568.
I am paying all my loans and credit cards on time and there is no balance on them.
I had two credit cards which were written off which I have recently settles but not reported to CIBIL as of now. How will it affect my CIBIL Score?
Do you know which Bank can offer me a car loan with such a score?
It seems very difficult. You may check with co-operative banks.
Thank you for the wonderful write up. i came here through a random google search end up reading every article. I recently took cibil score by my own as i wanted to apply for home loan from SBI. score is 620, while i know score is OK i am waiting for SBI to confirm the loan status( 25L). I had closed a credit card in 2009 without any dues for which cibil score showed it as defaulter. I obtained NOC in june 2015 for the same. Credit card company said it was their mistake and corrected it. Another decripency seen are they mentioned many enquires of car loan, credit card etc almost every 3-4 months in the past. fact is i was not in india itself and i already have a car! How can i improve my score by raising these false information?
For a home loan, a score of 750 or more is required. For any fraudulent entries, you may raise online dispute through the following link
https://www.cibil.com/file-consumer-dispute/
Hi Nitin, I have closed my Credit Card A/C in 15-02-2009, but I see in report Bank is still reporting as 000 or XXX, how can I handle it?
000 or XXX does not impact your CIBIL score.
I read in one of your article from the day bank stops reporting any details, post completion of 7 years only that records will be deleted from CIBIL report, but of bank is still reporting I dont see that will be removed for ever, can you help to understand this pls?
You can request bank to stop reporting else you will approach consumer court.
Hi Nitin, Do me a fever how to check commercial cibil report ,In Commercial report noting is their like score.what are the parameters should i check.
Please visit cibil.com for commercial CIBIL report.
Hi recently I check my cibil score it’s shown 729 can u tell me how it is & can I apply a credit card
It is average score. Only CIBIL score cannot guarantee credit card. Banks look for credit behavior.
Hi Nitin Sir,
I borrowed consumer loans from capital first financial institution and I’ve paid all my dues and EMIs on date without any delay. But still they have reported STD in my DPD section instead of 000.
Please help if I’ll be further eligible to avail any credit facilities or not. But I’ve a CIBIL score of 774. I’ve only signs like 000,XXX and STD in my CIR.XXX is used once only. Please tell me if I’m eligible for a further loan or not please sir.
000, XXX or STD is normal reporting for on time payment. You need not worry. It will not impact your CIBIL Score negatively.
Hi Sir,
Recently i applied for a Car loan.I was told by the bank that if my cibil score was above 750 i would get a interest rate of 8.5%.I checked my cibil score on cibil and it was 775.The bank later told me that my score is 682 and hence i have to pay interest rate of 9.25.I asked them for proof and they sent me a pdf where my Cibil score version 2.0 was 682.
As far as i am aware Cibil 2.0 score will almost always be lower than the cibil 1.0 score and on a bit of reading came to know that a version 2.0 score off 662-692 can be considered to be above 750.This looks like banks are using version 2.0 scores and keeping eligibility at 1.0 scores.Poor Stuff.
I understand your concern but CIBIL Score 2.0 is typically for new borrowers who have a short credit history, i.e. 6 months. The interpretation or reading of the score is subjective. It is up to bank, which version they would like to refer for risk assessment.