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Credit score, you must have heard its name many times, and you must be aware of it. But do you know that even after paying the loan on time, this score can go down. Surprised! Yes, this is true. For this, you have to understand the complete ABCD of credit score. What is a credit score, how does it work, and when do banks get information about it? After knowing all this, you will understand the inside story.

What is this CIBIL score?

The full name of the CIBIL score is Credit Information Score. Its range is between 300 and 900. That is, the closer your score is to 300, the worse it will be considered a bad CIBIL score. At the same time, the closer it is to 900, the better the CIBIL score. The purpose of creating the CIBIL score was only that banks can check your history before giving you a loan. Along with the CIBIL score, a CIBIL report is issued, which contains information from taking a loan to repaying it. In simple words, CIBIL is a mirror, and the bank can see through it whether it will get trapped after giving you a loan or not.

Who issues the CIBIL score and report?

In India, the responsibility of issuing CIBIL score and report lies with the Credit Bureau (TransUnion CIBIL Limited). The Credit Bureau has the details of the PAN card of every Indian citizen, through which they keep taking information about the loans taken by you from the bank. Suppose you took a loan of Rs 10,000 from 'Bank A'. Then the bank will give its information to the Credit Bureau. Along with this, the bank will also keep giving updates on this loan to the Bureau from time to time. Now you have applied for a loan of Rs 15,000 from 'Bank B'. Then Bank B will take information about you from the Credit Bureau, which will help in knowing whether you have taken a loan earlier and can repay it on time or not.

If Bank B comes to know that you are not able to repay the loan of the first bank properly, then it will refuse to give you a second loan, or the bank will agree to give you a second loan at a higher interest rate. This is because there is a risk in giving you a loan.

Information is not reaching the credit bureau.
Now, coming to the point that you are paying the loan on time, but still your CIBIL is falling... This is because, suppose you are paying the loan every month, but your bank is not able to give its information to the credit bureau, due to which your CIBIL report is not getting updated. There is no fault of yours in this, but you have to bear the brunt.

Contact the bank immediately.
Therefore, just paying the loan installment on time is not enough. If you feel that your CIBIL is falling. There is no update in the report; then contact your bank immediately. It is possible that the information is not being passed on due to some technical problem.

Disclaimer: This content has been sourced and edited from Amar Ujala. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.