New Delhi: Congress MP Karti Chidambaram on Wednesday questioned the reliability and accountability of CIBIL scores, a private company managing credit histories for over the Indians to determine their chances of loan approval in the future.
He claimed that in the absence of a proper redressal mechanism, the financial difficulties faced by a significant portion of the population are exacerbated.
“Like Chitra Gupta makes accounts of all our activities in this world to Yamadharma, there is this agency called ‘CIBIL’ that is keeping a record of all our transactions. If you want to take a car loan, or if the finance minister of the country wants to take a house loan, everything depends on the CIBIL score. But nobody knows how this CIBIL organisation works; it is a private company called ‘TransUnion,’” he said while speaking in the Lok Sabha on Wednesday.
“This is the company that is rating every one of us based on our credit history, but we do not know whether they are updating our credit history properly. There is no transparency, and there is no way for us to appeal. There is a complete asymmetry between the company that is rating us and us. There is no redressal at all, sir,” he said.
CIBIL Score - set on fire @KartiPC 🔥🔥 pic.twitter.com/RuEBEsvmDj
— With P.Chidambaram - Fan of P.Chidambaram (@wthPChidambaram) December 3, 2024
“Every time we go tell a bank, I have paid my loan on time, but they will say, ‘No, your CIBIL score is bad. We do not know how to approach CIBIL. For farmers, when they get a subsidy from the government, when they use the subsidy to repay the loan, CIBIL does not update it. If you go for a settlement with the ARC, CIBIL does not update it. There must be greater transparency. The government has missed out on an opportunity to make life easier by reforming these things instead of just tinkering in the margins,” he further said.
His comments come in the backdrop of opposition members strongly opposing a banking reforms bill brought by the Bharatiya Janata Party (BJP) on Tuesday. The opposition termed the bill as a “donkey passage” aimed at privatising India’s banking sector.
Know More About CIBIL Score
The credit score, or CIBIL (Credit Information Bureau India Limited) score, ranges from 300 to 900. The upper limit reflects good management of credits in the past, while the lower limit shows poor credit management. This score determines the chances of loan approval in the future, as most lenders consider this before going ahead with the sanction.
Scores above 800 are excellent, 750-800 are good, 700-750 are fair, and 650-700 are poor.
How To Improve CIBIL Score
If one ensures timely payment of loans, EMIs, and credit card dues to avoid late payment penalties, the CIBIL score will be improved. Similarly, one should aim at using less than 30% of his or her credit card limit to show responsible credit usage. One should also keep their older credit card accounts active.
