Faulty credit report? How you can set it right

All of us at some point or the other take loans like home loan, car loan, personal loan, etc, from financial institutions. You may, in some instances, also find that the loan does not get approved in spite of your satisfying the loan eligibility criteria. It is then obviously time to learn that financial institutions approve or reject loan applications based on your credit history as reflected by the 'Consumer Credit Information Report' (CIR) (http://www.cibil.com/accesscredit.htm) developed by the Credit Information Bureau of India Limited, CIBIL.

Today, with rising aspirations and consumption-oriented living, most of us end up spending beyond our current earnings. To fulfill our spending needs we leverage on multiple loans and credit cards. This ever-increasing need for credit is an excellent business opportunity for financial institutions. At times, for some individuals, the continuous spiral of spending and loans do cause loan or credit defaults. The loan and credit card delinquencies create bad loans in the books of financial institutions thereby making disbursing credit a risky business for financial institutions.

Also there are perennial defaulters who will either take loans from multiple institutions with the intention of default or will take loans fully aware that they will not be able to pay the loans. So financial institutions need process and data, instead of instinct and human judgment, to assess the risk involved in disbursing credit to individuals. They need a risk assessment process that help separate good borrowers from loan defaulters.

Financial institutions use the CIR to avoid loan default and delinquencies. Your CIR, generated by CIBIL, is shared with member financial institutions who request for your CIR report. CIR contains data on your credit history regarding loan and credit card payment and defaults.

The CIBIL initiative is relatively new and still evolving in India. At the current moment CIBIL is the only third party and independent system available to financial institutions to check on your credit history and therefore the best tool available to financial institutions to make judgment about your credit worthiness. Your loan application would get rejected (as a standard procedure) if your CIR shows a history of loan or credit card default.

Click NEXT to read how to get your CIR

The author is co-founder and director of Bangalore-based Perfios Software Solutions Private Limited. www.perfios.com is a personal finance software solution that provides a 360-degree view of your personal finance, with very little manual intervention.

Usefulness of CIBIL CIR report for individuals

As a good practice get your CIR report from CIBIL before applying for any loan if you are already having multiple loans / defaulted on your credit card or loan payment. You can request for your CIR directly from CIBIL. Getting your CIR report serves 2 purposes:

1. This will reaffirm your good (or bad) credit history before you apply for that much-awaited loan

2. You can use your good CIR report to bargain for a lower interest rate or maybe even better loan terms. Better terms could include lower processing fee / waiver of part-payment / pre-closure charges, etc.

How to get CIR for an individual

1. Complete the CIR Request Form available on the CIBIL website (http://www.cibil.com)

2. Self-attested hardcopies of your identity proof and address proof.  Valid identity proof: PAN card/ Passport/ Voters ID. Valid address proof: Latest bank account statement/ Electricity bill/ Telephone bill

3. Fee in form of demand draft (DD) of Rs 142 (inclusive of all taxes and express delivery charge), in favor of 'Credit Information Bureau (India) Limited' payable at Mumbai. Please note that the fee once paid is non-refundable

4. Post the form, documents and fee to P.O.BOX 17, Millennium, Business Park, Navi Mumbai- 400710

5. Once CIBIL receives the documents and fee, your request will be processed and copy of your CIR will be dispatched to you

6. You can reach CIBIL for vie email at consumerqueries@cibil.com or call 022-61404300
CIBIL plans to make the CIR report available over the Internet or online in the coming months.

Few common errors in CIR

At times the CIR report can be erroneous. Errors in CIR can be for any of the following reasons:

1. Delay in sending data by financial institutions to CIBIL. As financial institutions report data to CIBIL once in a month or in some cases even once in a quarter only

2. Consolidation of incorrect loan or credit card data based on same or similar names

3. Banks do not accept their mistake for a credit card or loan default even when there is clear proof of bank's mistake. In these cases bank will show you as loan defaulter, and the same default will be reflected in your CIR

4. Your have actually defaulted on your loan or credit card, and you are not ready to accept your default. So you will classify this data as an error

Click NEXT to read how to rectify errors in your CIR

However, such errors can be corrected. There is process to get the CIR report corrected. Some of the common errors and its rectification process

1. Paid off your loan recently and CIR shows default: If you have recently closed or paid-off of your loan or credit card dues then wait for the regular monthly or quarterly updates from your financial institution to CIBIL. In case of an emergency get no-dues certificate from your bank

2. Paid off your loan long ago and CIR shows default: You write to your financial institution to get your CIBIL data updated. In case of an emergency get no-dues certificate from your bank. You can write to your bank by visiting the bank's website and registering a compliant, or by visiting the bank's local branch office. Always keep documentary proof of your correspondence with the bank.

3. Incorrect loan or credit card data: You write to CIBIL to correct the incorrect data. Incorrect data can appear in your CIR report because of incorrect collation, like using similar names as collation parameter of data from multiple financial institutions in your CIR report. You can write to CIBIL at P.O.BOX 17, Millennium, Business Park, Navi Mumbai- 400710. Keep documentary proof of your correspondence with CIBIL

4. Not availed any loan and CIR shows default: Write to bank and / or CIBIL to correct the loan data. Keep documentary proof of your correspondence with bank / CIBIL

5. Not availed any credit card and CIR shows default: Write to bank and / or CIBIL to correct the credit card data. Keep documentary proof of your correspondence with bank / CIBIL

6. CIBIL / Bank is not responding to queries: You write to the Banking Ombudsman if CIBIL and / or bank are not responding to your queries. Attach your documentary evidence / correspondence with CIBIL and bank while writing to the Ombudsman. You can write to the Banking Ombudsman at https://secweb.rbi.org.in/BO/compltindex.htm, or by visiting their local branch office listed at http://rbidocs.rbi.org.in/rdocs/Content/PDFs/68033.pdf