Opposition leader K Chidambaram Criticizes Modi Govt Over Loan Rejections And CIBIL Rules

Opposition leader Karti Chidambaram lashed out at the Modi Government regarding concerns that banks were rejecting loans based on CIBIL scores, according to a recent media report. He mentioned six rules made by the Reserve Bank Of India (RBI) regarding CIBIL scores which will come into effect from next year and said that common people were suffering as a result. 

The opposition leader’s accusation was that CIBIL was working with a lot of lethargy. He also said that CIBIL was under a private institution that was tracking the credit history of more than 60 crore Indians and since this was being done without any transparency, most people were facing difficulty in getting loans. 

CIBIL Scores And How It Affects Loans 

CIBIL scores are a score that determines the creditworthiness of a borrower. In India, there are four credit bureaus -CIBIL, Equifax, Experian, and CRIF High Mark. The Credit bureaus calculate credit scores based on an individual's credit history and financial behaviour. 

They analyse key factors like payment history (on-time payments vs. defaults), credit utilization (the ratio of credit used to available credit), length of credit history (how long accounts have been open), types of credit (e.g., loans, credit cards), and recent credit inquiries (new credit applications). These factors are assigned different weights, with payment history and credit utilization having the most significant impact. The resulting score helps lenders assess an individual's creditworthiness for loan approvals or credit limit decisions. 

What Is A Good Credit Score?

In India, a good credit score typically ranges from 750 to 900. This score is considered excellent and indicates strong creditworthiness, making it easier for individuals to secure loans or credit cards with favourable terms and lower interest rates. Scores between 700 and 749 are also considered good and generally lead to loan approvals, though the interest rates may be slightly higher. Scores below 700 can make it more challenging to obtain credit or loans, and those below 600 are usually seen as poor, leading to higher interest rates or outright loan rejections. Regular on-time payments help maintain a good score. 

To improve your credit score, make timely payments on all loans and credit cards, reduce outstanding debt, and maintain a low credit utilization ratio (preferably under 30 per cent). Avoid frequent credit inquiries, as they can negatively impact your score. Regularly check your credit report for errors and dispute any inaccuracies. Maintaining a long credit history also helps.