Credit Information Bureau (India) Limited or CIBIL is a credit information company licensed by the Reserve Bank of India (RBI). There are three others – Equifax, Highmark and Experian.
Consumer CIBIL
A consumer CIBIL credit score is a numeric value of an individual’s credit history – ranging between 300 to 900. This number is derived from the credit information report (CIR). This report contains the details of the credit exposure, payment history, defaults, credit duration etc. of the individual. It doesn’t contain savings, investments and other financial asset details. Its objective is to assist lenders to evaluate the creditworthiness of potential borrowers.
Commercial CIBIL
Just like individuals, commercial entities also apply for credit instruments. The credit utilization summary of a company gets reflected in its commercial credit report. The companies with a credit exposure of up to Rs. 50 crores get a CIBIL rank ranging between 1 and 10.
Here is a summary of the differences between Consumer and Commercial CIBIL:
Parameters
Consumer CIBIL
Commercial CIBIL
Target
Individuals
Companies
Credit model
CIBIL scores between 300 to 900
CIBIL rank between 1 and 10
Report
Credit Information Report
Commercial Credit Report
Attributes used for calculation
No. of accounts, No. of loans, No. of credit cards, Repayment patterns, etc.
Company financials, Industry, Credit history, Credit utilization
Usage
The CIBIL scoring/ranking allows banks and other lenders to assess the creditworthiness of individuals/companies. It allows the lender to evaluate the repayment ability before giving out a loan.
A consumer CIBIL score of greater than 700, is considered a sign of a healthy credit handling behavior, hence the lenders often charge a lesser rate of interest from such borrowers. On the other hand, a low CIBIL score attracts higher interest rates as the rates include a higher probability of default as well.
The consumer CIBIL score is also used before issuing a credit card to an individual. The credit limits of the card are increased based on the repayment behavior and CIBIL score movements.
Similarly, a commercial CIBIL rank closer to 1 is an indicator of high creditworthiness. As the rank nears 10, lenders would be wary of lending to such companies. For example, a company in a highly volatile industry such as oil and gas would be ranked higher than one in a much more stable industry like food and textiles.
Features
A consumer CIBIL credit report consists of the following information:
CIBIL score and credit summary
Personal information
Contact information
Employment information
Account information
The lenders pay specific attention to:
Accuracy of information
Days past due table for missed installments and delayed payments
Credit mix to check the kinds of loans availed
A commercial CIBIL report on the other hand consists of the following information:
There are 3 subscription plans- Basic, Standard and Premium – any one of which can be purchased as per the requirements.
Here are the steps to obtain the same
Enter the details of the company such as ID, name, contact information, address, etc.
Check the ‘Agree to terms and conditions’ and then click on ‘Submit and Continue
Choose the method of payment and enter the payment amount depending on the chosen subscription plan Upon completion of payment, you will receive a transaction ID and Registration ID on the registered email
Complete KYC
You will get the commercial CIBIL rank and the commercial credit report within 7 days of completing KYC
You can make a commercial CIBIL login anytime, and refresh your reports and rank after getting the first report
Advantages of a good CIBIL score/rank
Faster Loan approvals
A good consumer CIBIL score/ commercial CIBIL rank makes it easy for lenders to grant loans to the borrower.
Competitive Interest rates and lower processing fee
Since the entity with a higher CIBIL score/lower CIBIL rank is seen as a better credit utilizer- the interest charged is lesser, and sometimes even the processing fee for such a loan is lower.
Pre-approved loans
A good CIBIL report comes with some pre-approved loans from various lenders. This enables one to achieve their financial goals sooner than expected
Advantage in negotiations
Companies with high CIBIL ranking can negotiate better debt deals as even a slight change in interest rates has a compounding financial impact.
How to maintain a good CIBIL score/rank
Since a CIBIL score/rank is so important to future credit approvals, here are some steps to maintain a good credit profile:
Timely payment of installments, utility bills and credit card bills since all overdue payments are a part of the Credit report prepared by CIBIL
Maintenance of a low credit utilization ratio to indicate minimal reliance on credit for meeting financial goals. For companies, this is called the debt-to-equity ratio.
Regular checking of credit reports and reporting of errors to ensure that the information with CIBIL is updated and accurate
Avoiding multiple simultaneous loan inquiries as this indicates a high need for credit lowering the perceived ability to pay it off.
Summary
All in all, consumer and commercial CIBIL reports analyze the creditworthiness of individuals and companies respectively. While an individual’s credit behavior can be seen from the type of credit exposure and repayment behavior, the same for companies requires a deeper analysis of their industry type and existing debt structure.
The metric has a similar use case for both entities and it is to their absolute advantage to maintain a good credit history.
01 June 2023
6 mins read
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