RBI’s CIBIL score rules: A must-know guide for borrowers

Your creditworthiness is depicted by your CIBIL score, which is a three-digit figure normally ranging from 300 to 900. It is one of the prime factors which lenders consider when deciding to accept your application for a credit card or loan. Knowing the guidelines and factors that govern your CIBIL score is essential in maintaining a healthy financial profile. Let's discuss its key features and the most recent legislation governing it.

What is a credit score?

Your creditworthiness is represented numerically by your credit score. It is determined using information from your credit report, which comprises:

• Payment history: The timeliness of your bill payments.
• Credit utilisation: It is the ratio of your credit usage to your credit limit.
• Credit history: Length of credit history or period of credit usage.

The credit score will enable lenders to set the loan terms, decide the rate of interest, and then grant or reject it.

CIBIL score guidelines

RBI (Reserve Bank of India) has updated the CIBIL rules in April 2024, for more transparency in credit management and being consumer-friendly, with respect to this, the central bank added one more credit rule in the list. The main aims of these rules are maintaining fair practices and to educate consumers about their credit scores. The major changes include:

1. CIBIL update every two months: Banks and other financial organisations will now have to update the credit scores of their clients every 15 days from January 1, 2025. Credit information shall now be updated in the form of CIBIL scores on the fifteenth and last day of every month to ensure that it is up to date.

2. Credit report check notifications: The RBI demands that you be notified each time a bank or NBFC access your credit report. So that you remain informed about who is accessing your credit information, this information will be mailed to you via email or SMS.

3. Explicit reasons of rejecting: This includes providing a reason if a lender denies your loan or credit card request. Because of this, consumers have a better chance of understanding and even resolving the reasons for denying them credit. Banks and other lending businesses are obliged to provide the consumer with a full account of the denial.

4. Free full credit reports: Credit agencies are mandated to provide free, detailed credit reports annually to consumers. Credit companies should also have a specific link on their websites for their customers to request their free report for ease of access.

5. Default alerts: Lenders are expected to notify the customers before filing a case of default. All relevant information should be sent through e-mail or SMS by loan providers. In addition, nodal officers should be appointed by banks and other financial institutions to redress the grievances of consumers about defaults.

6. Timeline for redressal: A consumer complaint will have to be acted on within 30 days from its submission to a credit information business. If the problem is not redressed within this timeframe, the business shall be penalized ₹100 a day until the matter is resolved. The credit bureau may even have to compensate the customer for the nine-day wait after the bank adjustments.

In conclusion, you may better manage your credit and avoid surprises by having these in mind. Your financial accountability is reflected through your score in CIBIL more than just a number. One may get better credit cards, the loan arrangements, and even work chances once one has a high score. Knowing the rules of CIBIL scores will protect your monetary security and make more informed decisions when it comes to credit.