Types of CIBIL Errors and How to Correct them

The CIBIL score is a three-digit number between 300 and 900 that reflects a borrower’s attitude towards credit and their ability to repay loan on time. The purpose of CIBIL score is to help lenders assess the risk involved in lending money to a borrower. The CIBIL score is calculated based on the credit information report, also known as the CIBIL report, which is an electronic representation of a borrower’s credit repayment history. A borrower’s CIBIL report contains information regarding their credit history, i.e. the ongoing loans that one has and the loans they have already repaid, credit cards they are using, credit card dues, etc. The credit information report also contains information regarding a borrower’s employment status and history.

Sometimes, your CIBIL report may contain errors that must be corrected. Failure to do so will lower your CIBIL score and, as a result, your chances of obtaining a loan or credit card in the future. This article will explain the types of CIBIL errors that can be found in your report and provide a step-by-step breakdown of the CIBIL report correction process. 

What is the Importance of CIBIL Score?

The CIBIL score depicts a borrower’s ability to repay loan on time. It ranges between 300 and 900 and the importance of CIBIL score in the loan approval process is such that any borrower who does not meet a lender’s loan eligibility criteria regarding credit score gets instantly rejected. Borrowers who have a good CIBIL score, i.e., anything between 750 and 900, are borrowers who have a responsible attitude towards credit and very unlikely to default on loan repayment. Thus, the minimum CIBIL score for Home Loans is 750 and borrowers who have such a CIBIL score get approved for a loan instantly. Further, such borrowers are also offered loans on highly lucrative loan terms and conditions, such as low interest rates, long repayment tenor, etc. On the other hand, borrowers whose CIBIL score is below 650 find it difficult to get approved for a loan. 

A CIBIL score between 700 and 750 is considered fair and though such borrowers get approved for a loan, the terms and conditions of the loan are not always beneficial. This is because borrowers who have such a CIBIL score have missed EMI payments in the past and therefore, lenders know there is some amount of risk involved in lending money to such borrowers.  

If you are planning to fund a real estate purchase with a loan, make sure you have the minimum CIBIL score required for a Home Loan. This will help you avail of a higher loan sanction at low interest rates and therefore, also save a lot of money in the long run. 

Also Read: Tips to Maintain Your Business CIBIL Score Above 700

Sometimes, a borrower’s CIBIL score goes down due to no mistake of their own. Credit information bureaus assign a borrower a credit rating based on the information contained in their credit report. When lenders and other financial institutions pass on wrong information about a borrower, the borrower’s CIBIL score goes down, even when they have not made any mistakes. Our next section discusses the common mistakes that can creep into a borrower’s credit information report.

What are the Types of CIBIL Errors?

If you do not have the CIBIL score required for a Home Loan even though you have been a reliable and responsible credit user, check your CIBIL score report for errors. Here are some of the common types of credit report errors.

Incorrect Personal Information

Sometimes, borrowers pass on wrong information about a borrower, such as incorrect name, mobile number, email ID, PAN number, etc.) Though this does not mess up a borrower’s CIBIL score, it makes it difficult for a lender to identify the right borrower.

Wrong Loan Accounts on Your Name

Many people share the same names. Lenders deal with millions of customers and sometimes, this leads to confusion and lenders passing information regarding wrong loan accounts under a borrower’s name. This certainly messes up a borrower’s CIBIL score and their ability to avail of a loan in future.

Wrong Account Status and Payment History

Sometimes, even after a borrower has entirely paid off the loan, their CIBIL report shows the loan status to be active. Similarly, sometimes, even after a borrower has paid their loan EMI on time, their credit information report shows the loan EMI status to be paid. Such errors negatively impact a borrower’s credit rating and must be reported immediately.

Incorrect Credit Limit

Sometimes, a borrower’s credit report shows incorrect credit limit. This affects a borrower’s CIBIL score as it affects their credit utilization ratio. The credit utilization ratio is the ratio of balance used to balance available expressed in percentage. Borrowers who want to have the ideal CIBIL score required for Home Loan must maintain their credit utilization ratio under 30%. This is the reason why borrowers must their credit report from time to time and make sure the credit limit specified under each card is correct. 

Duplicate Accounts

Sometimes, a borrower’s credit report shows the same account added twice. This affects a borrower’s CIBIL score if the duplicate entries are delinquent or late accounts. Borrowers must get the duplicate accounts removed from their credit report if they are affecting one’s CIBIL score for Home Loan.  

Steps to Rectify CIBIL Report Errors 

If you see an error in your CIBIL report, report it immediately, especially an error that is affecting your CIBIL score for Home Loan. Follow these steps to rectify CIBIL errors: 

1. If you want to rectify CIBIL errors, you will have to raise a dispute with CIBIL. To raise a dispute with CIBIL, go to the credit information bureau’s official website and log in to your account with your account details. Once you are logged in, go to the dispute resolution section and fill the online form.
2. Credit information bureaus cannot make changes in your CIBIL report on their own. Thus, after you have submitted the form specifying the type of credit error, the credit information bureau will approach the lender regarding the errors that you have raised. Lenders are required to reply to CIBIL queries within 45 days. So, be prepared to wait at least a month for the query to get resolved.
3. As soon as the bank reverts to your query, CIBIL will make changes to your CIBIL score report. However, it will take a few weeks for these changes to reflect in your CIBIL score.

Steps to Improve Your CIBIL Report

If you are applying for a Home Loan or a loan or any kind, know that the minimum CIBIL score required for a loan is 750. Such a CIBIL score will not only ensure quick approval but also a lucrative loan deal. So, how to check CIBIL score and what to do if your CIBIL score is not within the good CIBIL score range? Well, one can check their CIBIL score online by either going to CIBIL’s official website or using one of the websites that offers this facility for free. Further, if your CIBIL score is not 750, do not worry. Here are a few tips that will help you improve your CIBIL score. 

Improve Your Credit History 

Your credit history makes up 35% to 40% of your credit score. It is the factor that most affects a borrower's credit score. Therefore, if your CIBIL score is below 750, start paying your credit card bills and EMIs on time. Set up reminders and auto-payments to protect your CIBIL score as well as protect yourself from late fees and other penalties. 

Maintain Low Credit Exposure 

Credit exposure refers to the ratio of credit used to the total credit available. Borrowers with high credit exposure have a low CIBIL score as lenders and credit information bureaus see these borrowers as being highly dependent on credit. Borrowers who want to push their CIBIL score into the good range must maintain a Credit Utilization Ratio of below 30%. This can be easily done by using one's credit cards wisely, not exhausting the credit limit on one's cards and paying the entire amount due each month and not just the minimum amount due. 

Maintain a Healthy Credit Mix 

Borrowers who have a healthy mix of secured and unsecured loans have a higher CIBIL score as a healthy credit mix convinces lenders of a borrower's ability to handle different types of credit. If your credit score is below 750 and you are already paying off a secured loan, such as a Home Loan or a loan against property, avail of an unsecured loan, such as a personal loan or a car loan, to  boost your credit mix and your CIBIL score. 

Keep Hard Enquiries as Low as Possible 

When a borrower applies for a loan, the first thing that a lender does is pull out a borrower's credit report. Lenders do this to assess a borrower's creditworthiness and repayment capacity. However, every enquiry that a lender makes about a borrower gets registered as a hard enquiry on the borrower' credit report. Too many hard enquiries show a borrower to be credit-hungry and reduce the borrower's CIBIL score. Thus, borrowers trying to enhance their CIBIL score must never apply for too many loans together. They must spread out their loan applications over months to ensure they do not have too many hard enquiries together on their report. 

Keep all Loan Accounts 

Lastly, borrowers must try and maintain old loan accounts and credit cards as the age of the credit history is directly related to one's credit score -- the older a borrower's credit history, the better their CIBIL score. Therefore, borrowers must never close old loan accounts and credit cards. 

Check Your Credit Information Report from Time to Time 

Lastly, sometimes a borrower's credit score also goes down due to errors in a report. Therefore, borrowers must check their report from time to time and make sure there are no errors in it.

Improving and maintaining a good CIBIL score is crucial. It it also easy. All a borrower needs to do is develop a basic understanding of various factors that affect a borrower's CIBIL score and keep the information mentioned here in mind while using credit cards and availing and paying off loans.

How Long Does it Take to Improve Your Credit Score? 

There is no clear answer to this question. The amount of time it takes to improve one's credit score report depends on the borrower's CIBIL score. If you have defaulted too many times in the past and your CIBIL score is way too low, it will easily take a few months for you to improve your CIBIL score. However, if your CIBIL score is around 700 and you just need to give it a bit of a push, you can expect to see changes within a few weeks or months. However, in general, if you are trying to improve your CIBIL score, be patient. Do not expect to see changes within a few weeks. 

Final Words

Your CIBIL score is one of the first things that borrowers will check when you apply for a loan. The importance of CIBIL score, therefore, cannot be undermined in the loan application process. Borrowers must check their CIBIL score report from time to time and make sure there are no errors in it. If you see any errors, report them immediately. Rectifying errors takes time. So, be prepared to wait at least a few weeks for the changes to reflect in your credit report.