CIBIL (Credit Information Bureau (India) Limited) score is a numerical value that represents your credit history. This score ranges from 300 to 900. The higher the score, the better your creditworthiness, which shows financial institutions how you have managed your loans and credit cards in the past.
Components of CIBIL score
- Payment History (35%): Whether you have made timely payments on your loans and credit cards or not.
- Credit Utilization (30%): How much percentage of your available credit limit are you using.
- Length of Credit History (15%): How old is your credit history.
- Types of Credit Used (10%): Which credit accounts do you have (credit cards, loans, etc.).
- Recent Inquiries (10%): How many times have you applied for a loan or credit card recently?
How to check CIBIL score
- Official CIBIL website:
- You can check your score by visiting CIBIL’s official website (www.cibil.com).
- You have to provide your personal details (name, email, address, etc.) and identity proof.
- You can check your CIBIL score for free for the first time, but if you want a detailed report, you have to pay a fee.
- Third-party websites:
- Many websites like BankBazaar, PaisaBazaar, etc. also provide the facility to check CIBIL score.
- You have to provide your personal information to check your score on these platforms.
- Banks & Financial Institutions:
- Many banks provide CIBIL score to their customers for free, especially if you have their credit card or loan.
If you have a good CIBIL score (750 or more), then it is easy for you to get loans and credit cards, and you can get good interest rates.
“Write off” means officially forgiving or cancelling a loan or debt, when it is felt that its recovery is difficult. This term is mostly used by financial institutions, banks, and businesses when they feel that some outstanding amount cannot be recovered.
What happens on write off
- Cancelling the debt: If the outstanding balance of your loan or credit card becomes very old and the bank feels that it is difficult to recover the money from you, then they can write off that amount.
- Accounting entry: The bank or financial institution “writes off” that amount in its books. This means that the amount is removed from its accounting records, and it decides not to recover it in future.
- Effect on Credit Score: When your loan or credit card debt is written off, your CIBIL score can be negatively impacted. This shows up as a negative mark in your credit history, which can cause you problems in taking loans in future.
- Tax implications: If a loan is written off, there can be a situation of tax being levied on that amount, because in some cases banks and financial institutions have to pay tax on that amount as per government rules.
Example
Suppose, you had taken a personal loan, but you could not make its payments and the outstanding amount of the loan became quite old. If the bank feels that it will be difficult to recover money from you, then it can write off that amount. You do not get any immediate benefit from this, but your debt is officially cancelled.
But remember that even after the write-off, you may still have legal responsibility for that amount, and if you have not fulfilled your obligations, collection agencies can try to collect the money from you.
Defaulter means a person or organization that does not repay its financial obligations (like loan, credit card payment, or any type of debt) on time, or has violated the terms of its loan agreement.
What does it mean to be a defaulter
- Not making loan payment: If you have taken a loan (like personal loan, home loan, or car loan), and you have not paid its EMI (Equated Monthly Installment) on time, then you are called a defaulter. When you do not make the payment within a certain time period, you can be officially declared a defaulter.
- Not making Credit Card Payment: If you have used a credit card and have not made the minimum payment on time, you may default. Credit card companies can declare you a defaulter if your outstanding balance remains unpaid for a long period.
- Legal Consequences: When a person defaults, he may face warnings, recovery calls, or legal action from financial institutions or banks. If payment is not made, loan or credit balance recovery can also be taken through agencies or courts.
- Effect on Credit Score: If you default, your CIBIL score or credit score is also negatively affected. This can make it difficult for you to take a loan in future, and you may also have to pay high interest rates.
Example
Suppose, you had taken a car loan and you are not paying its EMI on time. If you do not make the payment for 3-4 months, then the bank or financial institution can declare you a defaulter. This means that you have not fulfilled your financial obligations and legal action can also be taken against you.
To avoid becoming a defaulter, it is important to always pay your loans, EMIs, and credit card payments on time.