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Difference between CIBIL Rank and CIBIL Report

Difference between CIBIL Rank and CIBIL Report

July 9, 2022
5 min read
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Difference between CIBIL Rank and CIBIL Report
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The CIBIL report is a complete evaluation of your credit information and is available in the Credit Information Report of CIBIL. So, what is the difference between a CIBIL rank and a CIBIL report? The CIBIL rating is intended to analyse a commercial company's potential risk and is available on the Company Credit Report. 

Not only do individuals require loans. At some point of time business entities such as private limited companies, public limited companies, proprietorships, and partnership firms may need a business loan to bridge the financial gap. Hence, a good credit score enables a company to get trade credit and loans from banks and non-banking financial institutions with ease. A CIBIL credit rank represents a company's creditworthiness in the same way that a CIBIL score represents an individual's financial trustworthiness. A company's CIBIL rank is similar to an individual's CIBIL Score, and a company's credit report is similar to an individual's credit report. Then how is a CIBIL rank different from a report? Let’s find out. 

What is a CIBIL Rank?

Companies are given a CIBIL rank that ranges from 1 to 10, with 1 being the best and 10 being the worst. The financial fitness of most financial organisations is considered good if their CIBIL rank ranges from 1 to 4. The two key parameters that are taken into account for calculating a company's CIBIL rank are repayment behaviour and credit use. Note that CIBIL rank is only issued to enterprises with outstanding loans of up to Rs. 50 Crores. However, a company's lack of a CIBIL rank should not be viewed as a negative indicator. It simply signifies that the company does not meet the eligibility criteria for getting a CIBIL rank. The CIBIL rank of a company is recorded on the Company Credit Report. 

What is a Company Credit Report?

A Company Credit Report, or, CCR in short, is a detailed document that represents an organization's financial health and is compiled using data from various credit institutions. Lenders use this report to assess an organization's creditworthiness before approving any loan request. Other credit agencies, in addition to CIBIL, give full credit reports to businesses, just as they do for individual members. While this is a standard report format, it may vary depending on the Credit Information Company. All credit reports, on the other hand, are based on information obtained from banks and financial institutions. A Company Credit Report may include the following information about a business:

  1. Background information such as years of operation, any subsidiaries, ownership details. 
  2. CIBIL rank that ranges from 1-10 determining the company’s credit health. 
  3. Financial details such as revenue generation, credit limit assigned, and the company’s repayment history. 

What Factors Impact a Company Credit Report?

Just like an individual’s credit report is impacted by repayment history, and unpaid debts, a company’s credit report also has some detrimental factors. 

Listed below are a few factors that impact the Company Credit Report: 

1. Company Background

When compared to start-ups, older companies are more likely to have higher scores. The reason for this is that organisations that have been in operation for a longer time and have continued to expand and hence, they are considered to be more responsible when it comes to managing the finances as compared to those organisations that are smaller and newer in the business. 

2. Nature of Industry

Risks associated with the nature of the industry a company has sometimes have a detrimental impact on their Company Credit Report. For example, real estate is a high-risk industry with many ups and downs. Therefore, real estate companies may be considered as less creditworthy than others. 

3. Credit History

The duration of the credit history has an impact on the Company Credit Report. The longer a company’s credit history, the better their Company Credit Report will be. Companies may also have loans, and hence, their repayment history also has an impact on the Company Credit Report. Whether it is a firm or an individual, timely payment of overdue amounts is usually a major factor that helps in calculating a CIBIL rank or CIBIL credit score. CIBIL also considers the total amount of debt a business owes to various credit organisations while calculating the CCR. 

4. Credit Utilisation Ratio

A company's CCR works in the same way that an individual's credit report does. A corporation that uses more of its available credit appears to be credit hungry, and hence is regarded as less creditworthy. Keeping the credit utilisation to a minimum level will help a company have a positive impact on the CCR. 

A business should identify the factors that influence their CIBIL rank and Company Credit Report in order to improve them. Company credit cards are used by a number of businesses for a number of reasons. If a business is using a credit card to manage their finances, they must ensure to pay the loan on time because an outstanding debt might affect the CCR and cause the CIBIL rank to drop. Companies must not use up all of the credit assigned to them; rather, they should only take out loans that they can repay on time.