Ajit Jain (name changed), a mid-level executive at a law firm, was in for a surprise when he approached a private sector bank for a Rs 95 lakh-home loan.
The bank rejected his application on the grounds that Jain was blacklisted by lenders since he had defaulted in the repayment of his credit card dues. Though he is ready to repay his earlier dues, Jain does not know how to get a good credit history.
For many like Jain, the Credit Information Bureau (India) Ltd (CIBIL) may turn out to be the saviour. The bureau, which tracks your credit history and assesses your credit worthiness, and is also often responsible for your not being eligible for a loan, has decided to help and guide customers with weak credit records in the past. A specialised team will guide you to improve your credit score and worthiness before you apply for a loan.
“There are several customers who have had a poor credit history in the past but want to improve their scores and become credit worthy but who often do not have the right guidance,” Arun Thukral , managing director, CIBIL, told HT. “We will focus in assisting and guiding them to get a good credit worthy score and be eligible for a loan.”
Score, or a three-digit number ranging between 300 and 800, helps banks in estimating the credit worthiness and repayment capacity of a loan based on an individual’s past pattern of credit usage and loan repayment behaviour. The higher the score, the stronger is the credit history and worthiness of the individual. The score is given based on the income of the individual, his/her credit pattern and financial behaviour in the last 36 months.
Over 80% of consumers have a good credit history, said Thukral.
With a surge in the level of bad loans or non-performing assets, banks and other lenders have adopted a cautious approach in providing loans to consumers.
“Banks have become very cautious in giving loans and are screening each and every customer, tracking their past credit records and assessing CIBIL’s scores before sanctioning loans,” said a senior executive at a foreign bank on the condition of anonymity.