What is CIBIL Rank?
CIBIL Rank is derived from Company Credit Report (CCR) which summarizes a business’ credit profile in the form of one number. Ranging on a scale of 10 to 1 (where 1 is the best rank that can be achieved), the Rank is available for companies with current credit exposure of up to Rs. 50 crores. However, not having a CIBIL Rank should not be considered as a negative factor for companies. It just means that your company does not meet the criteria.
Just as individuals are given a CIBIL Score ranging from 300-900, companies too are assigned a CIBIL Rank. Most lenders consider a CIBIL Rank between 4 and 1 as a sign of a company that is least risky (and unlikely to default on a credit/loan repayment). Majorly, repayment behaviour and credit utilization are the two main parameters used to calculate a company’s CIBIL Rank.
What is Company Credit Report?
Company Credit Report (CCR) is a detailed document representing the financial health of an organization—this is based on information received from different credit institutions. This report is used by lenders to estimate the creditworthiness of an organization before granting a loan.
A typical CCR includes:
- Background Information – The report starts by stating the business’s background information like its parent and subsidiary companies, ownership, years of operation, etc.
- CIBIL Rank – The report also mentions the company’s CIBIL Rank which is a 1 digit number ranging between 1-10; the closer a company’s rank is to 1, the better its credit health is. It is an equivalent of CIBIL score for individuals.
- Financial Information – Next the report includes more financial details which determine the appropriate credit levels that lenders can let them borrow.
- Financial History – A CCR also includes a brief of the company’s financial history including the repayments, collections, revenue generation, and more.
What are the factors influencing Company Credit Report?
Company Credit Report for your company is prepared by CIBIL after having a good look at your company traits and financial history. Here are a few factors that impact your company’s CCR:
- Length of Credit History – Similar to an individual’s credit report, a CCR is also influenced by the length of credit history. Longer the credit history, better it is for your Company Credit Report.
- Credit Utilization Ratio – CCR of a company works in a manner similar to that of an individual’s. A higher utilization of available credit portrays a company as credit hungry and hence it is considered less creditworthy.
- Repayment History – Companies also have to avail several loans to keep their operations running and have to pay EMIs. Timely payment of outstanding amount is always good- whether it is a company or an individual.
- Outstanding Debts – The amount of debts outstanding with different credit institutions is taken into account by CIBIL while preparing your CCR. Hence, it is important to maintain keep only feasible amounts outstanding.
- Size and Life of the Company – Older firms are likely to have better scores on their CCR as compared to start-ups. The reason behind this is that the companies operating for a longer time with continuous growth ought to be more credible as compared to the ones that are smaller and newer.
- Industry – Sometimes, the industry related risks might also have a negative impact on your CCR. For example, real estate is a high-risk industry because of the frequent ups and downs, so the companies that are a part of the real estate industry might be considered less creditworthy than others. Obviously, other factors also count at the time of assigning a CIBIL Rank.
How can you improve your CIBIL Rank and Company Credit Report?
For improving your CIBIL Rank and CCR, you need to understand the factors that impact it as mentioned in detail above. In a nutshell, you need to keep the following points in mind to maintain a good financial track record for your company:
- You must have taken loans in the name of your company. Taking a loan is not bad, defaulting on its payment is. So make sure to pay back all your debts in time and get rewarded with a better CIBIL Rank.
- A number of companies make use of company credit cards. If you are using one, make sure to pay the EMIs on time as an outstanding debt can have negative impacts on your CCR and your CIBIL Rank could come down.
- Sometimes, banks and credit institutions can also make a mistake while reporting your company’s transactions. Keep a close watch on each and every transaction and if there is any mistake, get it rectified to avoid repercussions in future.
- Do not exhaust your entire credit limit. Only take loans that you think you can pay back in time. Maintaining a good balance of incoming and outgoing is always good for a company.
- Taking loans for a long term and paying them on time is better as it creates a good image of the company in front of the credit institutions.
What is the difference between the CIBIL Rank and the CIBIL Score?
What is the difference between the CIBIL Rank and a credit rating?
Historically, credit ratings have been used as a business’reputational collateral. Credit Ratings are usually solicited by a business/company and then issued by the credit rating agency after evaluating documents provided by the company and interviewing the company's management. The basic difference between your CIBIL Rank and your credit rating is that the Rank is derived from objective information directly from lenders as opposed to information provided by the company/business to a rater. This provides lenders with an unbiased credit rating that can be used to take critical underwriting/lending decisions.
How can I rectify any incorrect information on the CCR?
The information in the CCR is based on credit information received from lenders and banks about a particular company. However, if you notice any discrepancy in your company’s credit information, the easiest way to get the same corrected is to initiate a dispute request by submitting a duly completed Online Dispute Form. Please Click Here to initiate an online dispute request.
I didn’t get a CIBIL Rank. Why?
Your company may not be eligible to receive a CIBIL Rank because you do not fall under the following categories. Here are the eligibility criteria for a CIBIL Rank:
- Company should have a credit footprint, ie. utilized a credit facility or applied for a loan
- Business should have a current credit exposure up to Rs. 50 crores
* Please be assured that non availability of the CIBIL Rank is not viewed negatively. You can still evaluate your company’s credit performance based on your CIBIL Company Credit Report (CCR).