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CIBIL Score : Practical Significance in Life


CIBIL Score : Practical Significance in Life

Last updated: December 14 2015
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  • CIBIL Score : Practical Significance in Life

    Do you really need to worry about CIBIL Score ?

    Today someone asked me this question in my office ? I looked at him, A guy of good health and habits drives a sedan has a working wife and living away from parents in just 40s earning a handsome 6 figure salary. I wondered why he has put up this question. On seeing a surprised look on my face he threw his CIBIL report to me - Score 543 - I said had to relook again - yes it was 543 not 843. I was shocked and confused - then flipped through the pages of his credit history - he had 20 trades (accounts) out of which 9 were closed 3 still opened and rest were settlled or written off.

    I knew this guy for a quite a while and I never saw him spending beyond his means or trying to keeping up with Jones then what went wrong.
    Deeper look into the CIBIL report revealed that everything was fine till mid 2008 and after that went heywire - all personal loans were either settled or written all but one credit card were either written off or still reported as dpd >900

    Out of curiosity I asked why this has happened - he replied - market meltdown in 2008 has given him his share of pie. He suffered huge losses both on job and financial portfolio front was victim of lay off in a MNC along with his gf (he wasn;t married then) and since he was living away from his parents he had no one to fall back upon - But all these personal loans ? all these credit cards ? He replied - I wanted to settle my brother in some business so I got personal loans - and to meet day to day expense I used the credit cards as there were no savings and the rent had to be paid every month and scouting for another job also cost money.

    I asked why didn't he asked the money back from his brother - he tried to smile but I can see that he was not prepared to answer that question.

    Does CIBIL score matters to me - he asked again.

    I looked at him again - everything about him flashed within second in my mind - his age, his social status, his earnings, his wife;s earnings, his retirement and above all his future needs.

    I said NO CIBIL score does not matter to you anymore Now the turn of getting surprised was his - he quipped but CIBIL scores means good credit score.

    I would write here what I explained him.

    First of all look at yourself - Do you really need any credit right now or in near future - he said may be I would like to buy another house for investment then I might need it - I said - Another house right not your primary residence that means another risk, I said there are another options for investment which do not require credit - Yes! they might be small ticket old fashioned school stuff but they do work.

    Now since you and your wife both are earning and fortunately your wife has very good credit history so in case of emergency requirement she can help (Pl be reminded that spouse credit history does not affects yours)

    Again you are already 40 so even if you try to mend your credit score it will take a decade - 7 yrs so the bad stuff go off the report and rest to mend your score. Tell would you be really needing a loan at the age of 50 ?

    He shook his head and went off with a disbelieved look on his face.

    Once he left I started to give a little thought about this all hoopla about Credit History and scores

    I have thought of the age groups and situations where it matters and where it does not

    Age 20-30 - This age group is the most volatile age group - a make or break period and acutally opposite of what most personal finance pundits tell you - that you can take more risks as you have long time for work - to my understanding - the mistakes made in late 20s goes a long way and may land in you in situation where one would not be able to attain a financial freedom. So, this is age group MUST build a decent credit score.

    Age 30-40 - Ok till late 30s If you fall in this age group chances are that you are married, have some savings, may have defaulted on some cards, loans and some loans are already running and you are paying through your nose for your children education - and if you are like the guy who asked the question about cibil score you are still living on rent and planning to buy a house. This age group is the best time to take advantage of the credit history you built till now - Go for MAXIMUM possible - Don't worry about later defaults, settlements, write off - JUST GO FOR MAXIMUM

    Age 40- till you say goodbye - You Do Not Have to Worry about that 3 digit number called CIBIL in India - focus on your retirement - Instead of paying the full to revolving credit cards and high interest personal loans go for one time settlement - Yes It WILL ruin your credit score but does it really matters ? In India we do not have a policy that landlord or employer or insurance company or phone company looks into your credit score before letting you a house or hiring you or providing with the insurance etc

    So CIBIL scores matters ONLY till age 35 and once you are above that give a damn to it - and If you fall in that age and have running defaults for more than 3 years look at the Limitation Act 1963

    Comments Welcome!
  • #2


    Re : CIBIL Score : Practical Significance in Life

    Good article. CIBIL score matters only if you want to take loan, not for anything else.

    Also, even if you have closed off ANY loan, be it auto/personal/home loan etc, ALWAYS keep a copy of bank's closing letter. I was asked for a loan closed 3 years ago, just because that bank was lazy to report my loan closure, and the loan popped up in my CIBIL report.


    • #3


      Re : CIBIL Score : Practical Significance in Life

      CIBIL score is gaining an importance in our daily life. Very soon the mobile service providers, insurance companies and many others who offer credit facility may view your credit score. Nowadays, your employers can also do a background check before hiring you to check if you are financially sound and don't have a debt.

      I completely agree to the point that after closing your loan account you also need to collect your closure letter and keep it filed. In India we cannot rely on the banks completely as half of the times their data is ,not updated properly. Hence, we need to have the paper work done. Also, your credit card closure letter needs to be filed. Do not keep any unpaid balances as it may pile once and will add up to a big balance.


      Tags: cibil worry
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