How CIBIL Can Mess Up Your Credit Score
In April 2019, I had applied for a credit card and, to my utter surprise and dismay, it was rejected. I made some enquires and I was told, rejection was due to low credit score. I was in a state of shock because the last time, I checked my credit score, in 2018, it was 800 plus, which is classified as excellent credit score. I have 100% record of making timely payments of all bills, credit card and loan dues since beginning of my career, spanning almost 25 years. I have no outstanding loans, delays or defaults. I have cleared all my loans before time. I checked with friends in the credit industry and nobody could point out the exact reason for lowered credit score. 
 
As you know, your credit score, a 3-digit number generated by credit information companies (CICs), in the range of 300 to 900, with 900 being the best, is supposed to decide whether you will get a loan and at what interest rate.
 
Everything like a credit card or a home loan is dependent on your credit score and, hence, it is imperative that the scores are calculated and reported correctly. 
 
I tried to download my free annual credit report and I could find no link on TransUnion CIBIL Ltd (CIBIL)’s website to do so. A circular issued by the Reserve Bank of India (RBI) with number DBR.CID.BC.No.11/20.16.042/2016-17 dated 1 September 2016 mandates CICs like CIBIL to give one credit report annually to individuals annually in the same manner it is given to lenders. The lenders get downloadable copy of credit information report, however, CIBIL consistently refuses to give the report in downloadable format, the way it is available to lenders! 
 
 
 
(When you try to download free credit report, CIBIL directs you to this page for paid reports)
 
When I logged on CIBIL's portal, it came as rude shock to me to see my credit score has gone down to 662. On checking various credit card accounts (my only outstanding credits), I could see no delay or default in payment reported by any creditor. 
 
I tried writing to CIBIL regarding my credit score (it is quite a task to write to CIBIL, a technology-intensive company) and I was told that Axis Bank has reported a delay in payment due to which my credit score has been downgraded. 
 
However, the data submitted by Axis Bank card to CIBIL does not show any delay or default. When I challenged the response of CIBIL, I saw that my score has improved dramatically in few days! 
 
The moot question is: Can just one instance of delay lead to such a dramatic drop in credit score? One can have temporary liquidity issues and lenders do not miss a chance to profit from such opportunities by charging late fees or interest. Delay does not constitute default.  
 
While credit scoring models are proprietary, RBI has given some pointers on data to be used to generate credit score. One-off delay is certainly not a reason for change in credit score.
 
 
 
Axis Bank categorically denied reporting any delay or default to CIBIL. They even provided ‘glance report which indicates no delay or default on my part. 
 
However, CIBIL is not willing to disclose how and what Axis Bank had reported as delayed payment . CIBIL was consistent in its response that your score will improve with timely payments. I have a 25-year history of timely payments. It is clear that CIBIL has goofed up the scoring and data collected methodology. There is a flaw in its system. 
 
Moneylife made multiple attempts to get an explanation from CIBIL about how the credit score could drop to 662 for no reason and jump back around 800 immediately after raising dispute. But despite holding back this article for more than a week, we have not heard from CIBIL. 
 
When I took report of another credit information company, my score was 890 out of 900, which is as close to a perfect score one can get. While, there can be some marginal differences in scores, there cannot be wide variation in scores given by CICs, using the same data provided by lenders.   
 
I decided to check the patterns in credit score to see if the model used by CIBIL gives same result for different category of consumers and the results were inconsistent:
 
(a) My wife, has similar, timely repayment history over long period of time and her score is below 800.
 
(b) My mother has very nominal credit utilisation on single credit card and a very brief history of credit usage, has a score, which is in high 800s. 
 
(c) A friend, who has very high credit utilisation and timely payment history on multiple credit cards & other loans, has a score similar to my mother’s score.
 
(d) Another friend has his CIBIL score in lower range, due to default reported on credit, which he closed in 2009. 
 
CIBIL does not give credence to any mismatch in data reported by individuals.
 
The data reported by credit institutions is taken as gospel truth. Maybe we need a change in regulation. My experience of past two months with CIBIL is:
  • Keep checking your credit score and immediately report any deviations to CIBIL/other credit information companies.
  • CIBIL credit score model is far from perfect. Maybe true for other CICs also. RBI should mandate audit of algorithms used for credit score of all CICs. 
  • There are several websites offering credit reports. Do not buy credit reports. The CICs are mandated to give one report free every calendar year. Persist with CIBIL and other agencies.
  • Always maintain financial discipline. Your future financial health is dependent on what you do today.  
 
(Mumbai-based Girish Mittal is a Right to Information (RTI) activist. He was one of the petitioners in the Supreme Court against RBI for making public inspection reports of banks under the RTI Act.)
 
Editor's Note: CIBIL has responded to our emails and reminders on 3 September 2019 at 10.37pm. Here is their response...

"With reference to the consumer grievance cited, the CIBIL Score change in this particular instance was a result of an issue with the consumer's credit data, which we identified and corrected immediately. There was no issue in the score computation methodology and change in the score was the result of the data correction. As the issue pertained to the consumer's personal credit information, we contacted the consumer and responded to his queries directly. The quality, accuracy and security of the data we collect and maintain is paramount to us and we continue to enhance our processes, systems and technology to provide reliable solutions and services to our members and consumers.

CIBIL score is calculated based on the individuals credit history of past 24 months and is dependent on a combination of factors like credit utilization; type, amount and duration on credit facilities availed; month-on-month credit payment behavior; delinquencies and defaults; written-off/ settlements on credit facilities and also the credit history on loans guaranteed or co-owned by the consumer. The score is dynamic and will change based on the individual's month-on-month credit activity and payment behavior."
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    COMMENTS

    The Blute

    3 weeks ago

    Dear all,
    By writing this blog over here and raising the required questions , shall not solve the purpose at all. We all saw in the recent past that how the Corporate world has hand in gloves with different agencies of our Government.

    Indian Financial world is hugely need restructuring we all know.

    All of you who are raised valid questions here, the point is that have we took time and take our points to right department to concern person to resolve? The answer is NO.

    Until we all stand up and raised our issues to concern authorities, they are unable to resolve these issues.

    I lived in both the world from where this CIBIL thing came, but their social security structure is very different from India. When it arrives in India, it is like a cross breed between an ass and a horse.

    Hence the time has come to make a common platform where we all get together and make a formal presentation to the government in the official procedure.

    I am sure our government will understand and some kind of solution may come.

    bullets point:
    1. It is a huge Indian Public data depositary for example like Adhar institution. Hence it can't be given to private operators to handle it. It is for the safeguard of Indian Tax Payer citizens.
    2. How can a Private agency decide Indian Tax Payer's credibility? Whereas all Indian citizen pays taxes to our government.
    3. What is the authenticity of the data they are capturing, because it is one-way traffic.
    4. When anything deals with the Indian public. The office supposes to come under RTI. Now since Cheif Justice of India's office is under RTI even and I am sure CIBIL office is not above the Cheif Justice of India.

    If I missed out on any points please do let me know.

    Subhabrata Datta

    3 weeks ago

    I am proceeding with filing a PIL in Bombay High Court. At a time when the Ministry of Finance and RBI has instructed Banks to proceed with loan application on the basis of CIBIL scoring, the CIBIL score is the most unreliable and the organisation most unprofessional. I have had changes in my various loan status with no effect whatsoever on the score. Numerous visits to CIBIL office has met with standard responses.

    Srinivasan G

    3 months ago

    How CIBIL played with my credit score and spoiled my goodwill, for no mistake of mine? https://proteans.wordpress.com/2019/04/30/will-block-chain-really-solve-trust-issues/

    Pravin

    3 months ago

    CIBIL's entry into our Country needs to be examined. The moment laws were passed in India, they launched immediately . . . . Did they Lobby in some manner or other ??

    Credit score based lending in a so called mature Economy & Banking country could not prevent the US Sub-Prime Crisis in 2008

    The company hides behind on-line portal, mail ids etc; Common man suffers in hands of Bankers and (their) agents

    If any institution reports to CIBIL or any such entity, a copy of the same should be mailed and sent by post to the address available with the Institution in an Automated mode.

    How defaulting Corporates ( used to ) get to Evergreen their loans ?? Any CIBIL for corporates or only small fries, individual lenders ?

    Is CIBIL score Mandatory for borrowing, under which Law ?

    CIBIL should be held responsible for wrong scores and also penalised heavily to bring in Accountability - It operates like an opprtunistic entity which is not answerable to the individual whose data they store and make money out of.

    Banks etc should be mandated to take 'Express customer consent' to share their data and information' - with CIBIL.

    It is infringement of privacy of citizens of the country that Banks share their data with CIBIL in an auto mode, without curating, without consent.


    Sharad Jain

    3 months ago

    It is uncanny that Mr Girish Mittal has posted this CIBIL expose' , when I am going through a similar experience with CIBIL reducing my score and insisting that there has been a 'Late Payment' reporting by ICICI Bank by 9 days and/or by Central Bank of India. ICICI Bank has confirmed to me in writing that there is no late payment in my account. Central Bank of India, account was settled by me in July 2017. The account closed. How can there be a 'late payment' on a closed account!!!

    Have escalated to Satish Pillai, the CEO,TransUnionCIBIL it has been 10 days, but till date there has been no rectification. I have access to my CIBIL Report having paid for a six month subscription. I too discovered the drop in my CIBIL Score by chance, though the drop was marginal, but it did disturb me greatly. I too take pride on my credit history, payment record and vintage. I have taken up the issue with ICICI Bank also, they too seem quite lazy and tardy in providing quick resolution. I remember with great gratitude when Ms Sucheta Dalal and Moneylife had taken up on my behalf, years ago with RBI, CIBIL and the CEO/MD Deepak Puri of HDFC Bank for mis -reporting a default. I still recall the nonchalant response of Mr Puri.
    I get the sense that the blame lies with CIBIL software/ process, and they seem to be totally unconcerned and indifferent. There must be a provision to penalise these CIC for such frivolous acts which can be quite traumatic.
    May I request MLF to take the issue of Mis-reporting on our behalf.

    REPLY

    Umaid Sonday

    In Reply to Sharad Jain 3 months ago

    The best way to validate would be to check if other bureau reports are also reflecting late payment on a closed account. If other bureau reports are also reflecting the same discrepancy, it means that's how the data has been reported by the bank. If not, then the respective bureau might have more stringent data quality checks that won't allow such data to creep in.

    TIHARwale

    3 months ago

    time and again it is proved the need for audits and scrutiny of credit bureaus as well

    Haripada bera

    3 months ago

    Scrooss

    narsing rao

    3 months ago

    I was taken loan from home credit consumer loan I settled total outstanding amount but its shows write off how can I remove my nagitive status on my cibil score

    Raghu R

    3 months ago

    Same problem I am also facing scoring down words quickly but going up is dam difficult

    Inder Joshi

    3 months ago

    mostly banks are misusing this data and make customer run around . I realise a severe dent on my scores due to wrong input for 4-5 years until I checked and later I got this rectified but not much benefit . cibil works on delay payment date (DPD) , queries , write off ‘s , closure , Settlement algorithm for past 24 months trend , accordingly the score gets calculated.. actually on the ground this is not rightly governed and we are on bank , cibil mercy.

    Ramesh Poapt

    3 months ago

    my score is wrongly low. i m happy, no one approaches me
    for loan. headache gone! i will not be tempted to borrow!
    so good!! i can make it higher, but not now at least!

    Yogesh fabtex P Ltd

    3 months ago

    Similar experience I am also having with Cibil. While Experian and another agency give more than 800, Cibil gives arround 650-700. ZERO overdues, zero delays since last many years of credit history.

    Abhijit Kanjilal

    3 months ago

    very unreliable. Have a entry of personal loan against my PAN which I have never taken. when contacted to remove the entry they are asking to contact bank.

    REPLY

    Umaid Sonday

    In Reply to Abhijit Kanjilal 3 months ago

    CICs are not authorized to delete/modify data based on consumer requests. They are data custodians and banks/financial institutions are the data owners. Unless they get an official request from the data owners, the data will reflect as reported to them. Hope this helps.

    Hemant Pradeep

    3 months ago

    I am also facing same issues with cibil. I have taken home loan, personal loan, loan against property and always paid my installments on time. But still my cibil went down from 750 to 600. When I checked from cibil I got to know because of one old card ( year 2001) Rs. 2500 pending payment my cibil went down. I sent my case to cibil and told them that card I closed in year 2001 and I have paid the complete amount and I have a receipt of that payment. But still there is no reply from them and now because of that low score I can't apply for a.home loan 2hich I need very badly. Their system is totally one sided. Very bad.

    Subhash Agarwal

    3 months ago

    Cibil is a bogus and black mailing agency.
    With out any responsibility or damage to you in case of wrong score by them.

    25% discounts in trains with less vacancy: Railways
    In a bid to fill the vacant seats in trains and meet the challenges posed by the roadways and airways, the Indian Railways has decided to give discount of up to 25 per cent to passengers on ticket fares.
     
    According to the Railways, the decision will be applicable in air-conditioned executive class and chair cars of trains like Shatabdi Express, Gatiman Express, Tejas Express, Double Decker and Intercity Express.
     
    "A decision on giving discount of passenger fare was taken today (Tuesday) and a circular has been issued to all the zonal managers," a senior Railway Ministry official told IANS. 
     
    He said, under this rule passengers will be given up to 25 per cent discount on the base fare in selected trains with less than 50 per cent occupancy.
     
    According to the circular, the percentage of discount on the fare and the right to decide the route of the train has been given to the Principal Chief Commercial Manager of the Zonal Railways.
     
    Along with this, a guideline has also been issued under which trains and their route will be selected.
     
    The official said that the new guideline is based on the occupancy of the train in the last year. It also said that discounted fare can be given for the full year or part of a year, or month wise or seasonal or weekdays or weekends.
     
    "If the passenger occupancy is less on the entire route or it is less in between any two special stations, a decision will be taken on that basis," it said.
     
    Citing examples, the railway official said a lot of seats remain vacant from Kanpur to Lucknow of Lucknow Shatabdi running from Delhi.
     
    "In such a situation, the railways will waive passenger fares in that section," he said.
     
    He also cited the example of Ajmer Shatabdi, which runs from Delhi to Ajmer and said that many seats remains vacant between Jaipur to Ajmer.
     
    "Volvo bus service is the first choice among travellers shuttling between Jaipur and Ajmer," he added.
     
    Under the new strategy, Railways will aim to attract passengers by offering less fare than Volvo buses on such routes.
     
    Likewise, the Railways on a pilot project is providing 10 per cent fare or fixed fares on routes -- Chennai-Mysore Shatabdi Express between Bengaluru-Mysuru section, in Delhi-Ajmer Shatabdi Express between Jaipur-Ajmer, in Delhi-Lucknow Shatabdi Express between Kanpur-Lucknow, and in New Jalpaigudi-Howrah Shatabdi Express between Malda-New Jalpaigudi.
     
    Now this pilot will be implemented on all trains with AC chair car coaches.
     
    The railways has asked all the zonal railways to identify the trains with less occupancy and inform it by September 30.
     
    "If found feasible, the same shall be implemented with effect from applicable advance reservation period for the train on experimental basis for an initial period of six months," it said.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    COMMENTS

    Deb Datta

    3 months ago

    You may want to correct the headline of the article :-)

    jaideep shirali

    3 months ago

    If the much hyped 'bullet train' falls into this category in the future, I would not be surprised. But I feel that flexible fare pricing must be permitted for even the road transport buses. I travelled from Mumbai to Pune paying Rs 315 for a non A/c semi luxury bus, while on the return journey there are many Volvo A/c buses offering seats at just Rs 300 from Pune to Mumbai, because they get empty at Pune. Given this difference, how can state transport buses expect to get passengers and earn revenue ?

    Banks to Pass on MCLR Rate Cuts to Borrowers & Launch External Benchmark Lined Loan Products: FM
    Finance Minister Nirmala Sitharaman on Friday said that banks in India have decided to pass on marginal cost of funds based lending rate (MCLR) rate cuts to all borrowers.
     
    She also said that banks have decided to launch repo rate or external benchmarking-linked loan products, which will reduce EMIs on housing loan, auto and other retail loans.  
     
     
    For reducing harassment and bring greater efficiency, public sector banks (PSBs) are mandated to return loan documents within 15 days after the loan closure, the Minister said.
     
    Over the years, banks have not reduced lending rates in tune with policy rates announced by the Reserve Bank of India (RBI). Between February and June 2019, RBI has reduced policy rates by 75 basis points (bps). According to RBI financial markets have fully transmitted the changes in policy rates. The weighted average call money rate (WACR) fell by 78bps, market repo rate by 73bps and 10-year benchmark G-Sec yield by 102bps. But banks, on the other hand, have reduced their interest rates on fresh rupee loans only by 29bps during February-June 2019.
     
    And yet, earlier this month, RBI governor Shaktikanta Das, had decided to junk the linking of floating interest rates for retail loans to external benchmark. The central bank now wants to consult stakeholders and review liking of floating interest rates with external benchmark. Speaking to reporters after the monetary policy review, governor Das said that RBI is again having stakeholder consultation on linking floating interest rates for retail loans to external benchmark and is reviewing it.
     
    In December 2018, the central bank, then headed by Dr Patel had asked all banks to adopt new external benchmark for providing loans for home, auto and micro and small enterprises (MSME) from 1 April 2019. 
     
     “Our interactions with various stakeholders, including both public sector and private sector banks, indicate that steps are being taken by them on an ongoing basis to progressively lower their interest rates so that the benefits of the policy rate reductions are passed on to the economy. Accordingly, we expect higher transmission of monetary policy actions and stance by the banks in the weeks and months ahead,” Mr Das says. 
     
    Before the RBI decision of last December, Moneylife Foundation had filed a public interest litigation (PIL) in the Supreme Court (SC) praying for an external benchmark, among other things. The SC had asked RBI to respond to Moneylife Foundation. Instead of a specific response, RBI had gone ahead and announced the external benchmark.
     
    RBI's decision in December 2018 was based on recommendation by Dr Janak Raj Committee. The Committee in its 2017 report "Internal Study Group to Review the Working of the MCLR System" had provided a shocking account of how wide and deep banking malpractices are with regard to floating rate loans. It confirmed every one of our arguments about how banks cheat customers, fudge rates and extort conversion charges.
     
    Dr Patel resigned on 10th December and Mr Das took over as new governor of RBI on 12 December 2018. In April this year, Mr Das, who is a former revenue secretary, decided to keep  the issue of linking interest rates to external benchmark on the back-burner, much to the surprise and dismay of borrowers, who have been shortchanged by the banks.
     
    Mr Das, in his first monetary policy decision in February 2019, called Dr Patel’s directions as ‘draft guidelines’. In the April monetary policy statement, Mr Das stated that RBI would hold further consultations with stakeholders and work out an effective mechanism for transmission of rates.
     
    We have highlighted this issue in several articles and our Cover Story “Banksters” (Moneylife, 28 April-11 May 2017).
     
    The external benchmark suggested by RBI in December included its policy repo rate, government of India 91 days treasury bill yield produced by the Financial Benchmarks India Pvt Ltd (FBIL), government of India 182 days treasury bill yield produced by the FBIL, or any other benchmark market interest rate produced by the FBIL.
     
    At that time, Moneylife Foundation wrote to Dr Patel, the then governor of RBI, requesting to direct banks to calculate the excess interest they have charged (through arbitrary and ad hoc calculations of base rate or MCLR) and refund the money to borrowers, especially retail borrowers and SMEs. (See Excess Interest Charged by Banks under Base Rate and MCLR Regime) 
     
    “The RBI should also direct banks to set up special helplines to handle complaints from borrowers, whom banks have overcharged over the years. We also request the Reserve Bank to immediately issue circular/master directions asking banks and financial institutions to allow existing borrowers to migrate to MCLR or any new system without any conversion fee or any other charges for the switchover,” the memorandum had said.
     
    RBI refused to act on it. We then had to file a PIL in the Supreme Court.
     
    The PIL filed by Moneylife Foundation sought justice for a huge section of Indian population including the middle class and lower middle class, who are badly affected by such discrimination. The primary respondent was the RBI. Others named were: ministry of consumer affairs, ministry of finance, Indian Banks’ Association (IBA), National Housing Bank (NHB), Banking Code and Standards Bank of India (BCSBI).
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    COMMENTS

    Haripada bera

    3 months ago

    Yes

    Prakash

    3 months ago

    It is requested to my ,hon'ble FM that bank which lend towards loan on various categories to Individuals are not tie ing it up with cut on interest over bps It is also not been attaching it with instalment ,due to which ,the balance due are unknown to the loanee. SMS of due after instalment are not made .It is not understood why this is not been taken by all the branch ?

    priyanka

    4 months ago

    Expecting banks to follow is like searching for water in a mirage

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