10 Credit Hacks to Improve Your CIBIL Score

There was a time when people borrowed funds only in case of emergencies. They used to earn first and then think of fulfilling the desires, needs and wants of life. Today’s generation knows how to work harder, but just cannot wait till the time they earn sufficient money that is needed to get what they want to. Banks, financial institutions and other private lenders are here to fulfil the dreams of this new generation. But they are not angels, who will just give them the money and forget about it. They are in a business, and they want returns of their investment. That is why before lending money, they make sure that the borrower has sufficient repayment capacity as well as the intention to pay back the money with interest. For this they check the CIBIL score of an individual.

So if you wish to borrow funds anytime in your life, you must pay close attention to your score. If you find things out of control, you must take steps to increase CIBIL score. Here are 10 credit hacks to improve CIBIL score.

  1. Check your credit reports– The first thing that you need to check is whether there are any errors in the report. A low CIBIL score may be the result of mistakes on the part of the bureau which are not uncommon these days. Even though everything is digitized, errors do occur and become the reason for a low score. If the report reflects accurate information, then you need to identify areas where you need to focus your energies on to improve your score. Are you having too many loan accounts? Are your payments getting delayed? Is your outstanding balance on credit cards high? Looking at these factors will help you identify the road that you need to follow to reach your goal.

  1. Clear past due payment- Payments that are more than 90 days past due bring down your score drastically. Clear your past due payments, and start making all the future payments on time. An on time payment track record gives a boost to your score.

  1. Make a budget and stick to it- Having a credit card does not mean that you can spend as much as the credit limit allows. One needs to make a realistic budget and spend only what one can repay at the end of the month. Carrying huge balances on the credit card month after month will lead you in a debt trap.

 

  1. Credit utilization rate- The percentage of the credit limit that you utilize significantly affects the credit score. Maxing out the credit cards bring your score down. If you pay off your credit card balances it will reduce the utilization levels and help in improving CIBIL score.

 

  1. Pay the credit card bill twice in a month- If you use your credit card as a convenient means of paying for most of your expenses, it is possible that you reach the card limit when the bill is generated. Even if you pay the full balance when the card statement arrives, you may still have a low score, as the balance that is sent to the bureau for utilization calculation may be the statement balance. By making two payments in a month we can keep a check on the utilization levels.

 

  1. Take a personal loan to consolidate credit card debt- The credit card debt is the most expensive form of borrowing. If you have outstanding balances on multiple cards, it is advisable to take a personal loan to pay off all these debts. It will help you save money as personal loan is available at a comparatively low rate of interest. Moreover, the credit utilization levels decrease and help in improving the score.

 

  1. Raise in the credit limit- Check with your card issuer if you are eligible for a credit line increase. A rise in the credit limit also helps in decreasing utilization levels and increases your credit score.

 

  1. Negotiate with creditors- One can try if negative items can be removed from the credit report by talking to the creditors directly. Sometimes they agree to remove the entries out of goodwill. Find out if you can reach an arrangement with them wherein you pay the balance in exchange of the entry getting deleted.

 

  1. Keep old accounts open- Old and active accounts help in increasing the length of the credit history that has a positive effect on the credit score.

 

  1. Display good credit behaviour- One can take a loan with bad CIBIL score and make the payments on time to display good credit behaviour. This will help in building a good credit score.

 

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How To Update Your CIBIL Score Online

By now it is evident that what is the importance of your credit score and credit report. There are four bureaus in India, viz. CIBIL (Credit Information Bureau India Limited), Experian, Equifax, CRIF HighMark. These are the four bureaus that offer credit report and score of any individual. Now as well know that score is made up of 5 parameters: payment history, an amount owed, new credit accounts, account length and the mix of credits; different bureaus have different algorithms to check an individual’s score. A report, however, is the detailed information of how the score is made, and various transactions associated with an individual.

As CIBIL was the first bureau that was established in India in association with TransUnion, many people may consider credit score as CIBIL score and credit report as CIBIL Report. The score ranges from 300 to 900, where 300 is considered the lowest and 900 is considered highest. Any score that is 750 or above is a good credit score. The benefit of having a 750 or more score is getting the loan or the credit application approved easily with better interest rates. A score ranging from 600 to 750 is average and would take more efforts in getting loans and credits approved but with a higher rate of interest on them. And for anyone with a score below 600, it is nearly impossible to attain any credit. When the score is low, the most priority is to to get it to 750 level. Also, these days, a score is not just a measure of getting a loan and interest rate easily but it is a credibility score for many places. It is checked for jobs, visa applications, important study locations. Your score shows your responsibility towards the finances and how efficient are you in handling them!

So when you are planning to increase your CIBIL score, what would you do? As the parameters are explained, you have to work closely towards all the factors. First of all, start repaying all the debts and clear the old mess. Also, take a close look at the report. At times, it may happen that the transactions that make your score low, are not made by you. So, there is either fraud or identity theft that has happened with your account or using your information or some of the details are wrongly updated. What to do in such case? CIBIL has a dispute raising method online.

Go to the website and raise a dispute with the bureau. They would check the application and verify the error. Once it is they cross verify and check the issues, you score would be updated and unwanted data will be removed from the report.

This is the case when a dispute is to be raised, but what if one wants to update the cibil score online? Well, when you make any credit or related transaction, the information within a few weeks is passed to the bureaus. For example, you have applied for a car loan and a bank is processing it. So, first of all, it is reflected in the report as the hard inquiry. Once the loan is approved and the transaction starts, with all the EMIS which you pay including the down payment, the information is updated in the report. The banks and the NBFCs have to pass this information to the bureaus. Sometimes it may happen that some information is not updated in a particular report of the bureau, but do not feel hesitant to connect to the bureau and send an application to update that particular update which is missed. Banks at a time may miss passing the information.

So, there is no specific method to be followed when the score is to update in the report over the internet in normal norms, but yes, while dispute; do not waste time. Make sure you fill the form and raise it online as soon as you can.

Having a Good Credit Score can be a Money Saver. Read How?

If you were posed with the question that why should you have a good credit score, then the most common answer would be to get a loan application sanctioned. Well, that is true and is indeed often the primary and most common use of a good credit score. However what if this good rating can help you in other aspects also. One added use of a good credit score is in securing a job; apart from that a healthy rating can help you save money too. If you are wondering how, then the following discussing is for you.

How Can a Good Credit Score Help Save Money?

A good score is important, that is something which most of us may be aware, but how it can be a money saver? Here we discuss a few ways in which it can help you save money.

  • Helps Save Interest Cost: Lender charge interest on loan for two reasons; first for allowing you to use money that does not belong to you and second for the risk that they undertake when lending. As we know higher the risk higher the interest at which the loan will be available to you. Thus if you have a good score you can approach the lender who offers most competitive rates as you are sure of getting your loan application approved provided you comply with rest of the requirements laid down by the lender. A good score also prompt the lender you a loan at lower rates because they would be assured of getting the money back. So whether it’s personal loan interest rate or home loan interest rate, even a change of half a percent could help you save huge amounts. Obviously actual saving would depend on the quantum of loan, but a drop in rate however small is welcome.

  • Gives You Bargaining Power: Another way a good score can help you is by giving you a bargaining power to negotiate favorable terms with lenders. This means you can get a concession or waiver on various additional charges like the legal fee or the processing fee and you could also get favorable terms on pre-payment charges. All this could help you save money on your loans.

  • Could Help you Land a Job: This is not as much save money as earn it. Lots of organizations are seeking credit reports of applicants before hiring them. So if you do not have a good CIBIL Score you could end up losing a job opportunity despite having the right qualifications and skills for it. Not getting the job you deserve or have the qualifications for because of poor rating could make you lose lot of money in terms of remuneration.

  • Lets you Access Funds When you Need Them. There might be times when you might want to get a loan sanctioned at a short notice. This may be due to some emergency for which you need funds or because there is a window of opportunity like a deal on a car that you want to buy. Not being able to get funds on time could mean that you could end up losing that special offer which means you lose money when you buy it without the offer. It could also mean that you have to borrow at higher rates to deal with the emergency or break your investments,

So as we said earlier a good score is your ticket not only to getting loans sanctioned but it also lets you save money in various ways. Thus being credit healthy at all times became all the more important.

Why You Should Keep Your Credit Utilization ratio within 30-40%

Since years we have been listening to the saying, that spends only that much, how much you can earn. However, over the past few years, he thought has been changing. With credit cards coming into the picture and the availability of them have made it easier for many people to spend even when they do not have that much cash on hand for that moment. Credit cards have made it easier for people to access money when in urgent need. But, there are few asterisks (*) that comes with whatever we peruse. And when it is a credit card, the credit utilization holds the biggest asterisks. Even though the card has a given limit, it is never a good practice to use all of it!

With credit cards comes the credit utilization ration. But that? And what it? Let’s understand this with an example. Suppose the credit limit of a particular card owned by someone is 1,00,000 Rs; then it is advisable to use 30% to 40% I.e. 30,000 to 40,000 Rs max. Credit utilization is basically the amount that is spent on the total credit that is available to an individual of their card. And, the credit utilization ratio is the amount used divided by the total available credit limit. Now, the next question that arises is: why to maintain the ration? When the limit available is more, then why not use more.

A credit score is an answer to that. With many criteria that have their effects on credit score, this one also plays a role. The reason behind is, more the usage, more the debt. More the debt, more it seems that the person is in need of credit. And more the need of credit shows more debt burden. So its a huge chain of logic that have been eventually considered after studying many of the cases. The irony is if you have more than one cards, and collectively if you spend, and exceeds the total limit, 40% would still be okay. So, taking the above example, if there is one more card of the same limit, 1,00,000. and if one uses, 35,000 each card, i.e. 70,000 in total then it is okay. As the total credit limit available is 2,00,000. But, using 70,000 from single card shows credit hungry behavior. Of course, this does not mean that one should keep applying for the cards and use it. Everyone should always check the amount which they would be able to repay if spent before then paying.

Credit score a tricky concept. But easy to understand. More the usage of the credit card will imply that the cash in hand is unavailable. When the credit card is given, an individual’s salary or bank account is checked if they are either salaried or self-employed respectively and only then the card is offered or approved. But many, misuse it. And hence the credit bureaus check the credit utilization ratio. What to do if the usage is more and the limit available is less? Simple, as mentioned earlier, apply for one more card. But, one should not apply for too many cards. Even that states that it is a credit hungry behavior and one is in bad need of funds. Similarly, closing the older credit cards also would impact the score as the older accounts shows the credit behavior one has over these years. And account history is also one of the factors which comprise the credit score. Also, if one does not want to apply for new cards, they can always make the payment more than once a month. When the usage seems to exceed 30%, make a payment and revive the credit limit!

The moral to all this is, anything used on average is good. May it be the credit that is available! Using 30% to 40% of the total limit available over the credit card shows a responsible behavior. And that also maintains the score!

Use Secured credit card to Repair CIBIL score

If you have recently ordered your CIBIL report and found that you have a low CIBIL score, it is time to take charge of the situation and work towards improving it. Banks and financial institutions avoid issuing credit cards or lending money to individuals with a bad credit history. They pay a lot of attention to a person’s credit worthiness to avoid any risk of defaults. So a good CIBIL score plays a crucial role in the lending approval process. Many banks have cut off limit of a score of 650 -700 below which they reject the loan application.

In order to repair CIBIL score, one needs to prove that one can handle credit responsibly. For this one needs to make timely payments of loan instalments or credit card bills every month. But with a low CIBIL score, it would be hard to find a bank that trusts you with its money, or is ready to take the risk of lending to a person with a bad credit record. At such difficult times Secured credit card is a way out of this vicious cycle.

A secured credit card, works like any other card offered by numerous banks. The only difference here is that it requires one to keep a fixed deposit with the bank. The deposit amount then determines the credit limit that the bank offers on the card. So essentially, the bank does not face any risk of default. If the card owner does not pay his credit card bills, the deposit amount kept safe with the bank can be used to recover the amount.

Let’s look at some more features of a secured credit card

  1. Usually you do not earn any interest on the fixed deposit amount. You cannot close the FD till the time you are holding the secured card. Foreclosure of FD leads to cancellation of the card along with payment of applicable fees. After a year or two of responsible payment patterns, one can request a conversion of secured credit card to a normal card.

  1. There is very little documentation required to get a secured credit card. Generally all you need is an ID proof.
  1. The difference between a secured credit card and a debit card is that the secured card activities are reported to the bureau.

How does using a secured credit card repairs CIBIL score.

Timely payment of card bills is the most important prerequisite that is needed to build your credit score, through this process. The bank reports the payment behaviour to all the three credit bureaus. The payment details get recorded in your credit report and that forms a basis of your score. Since the payment history makes up 35% of your score, working on this aspect definitely gives a big boost to your score.

Remember, not using a secured credit card responsibly can bring down the score even further. So make sure you do not make any late payments, and do not default on them either. Do not use more than 30% of the available credit limit. A high credit utilization ratio pulls the score further down.

A secured credit card is a good option not only for people with a low credit score but also those whohave just started their journey of building credit. People with a lower monthly income, than the minimum income set by bank for issuing credit card can also use a secured card. Various banks like HDFC, Axis Bank, ICICI Bank, Dena Bank provide this facility. These banks allow a credit limit of 50% to 100% of the fixed deposit amount. But before you apply to any one of these banks for a secured credit card, remember to set your expectations right. You will not see overnight results. Just like all efforts take time to yield results, building a score also requires patience. It may take a few months before you start seeing any results. So you need patience and determination to start your journey. All the best !

How fast can my credit score increase

We are in an ear where everything that we want is instant. Instant is good. But it creates a lot of anxiety, impulse, and impatience. Everything instant is not good. Despite getting the results too soon, it’s always not necessarily perfect. There are many instances where the perfection or accuracy is not maintained at the speed of achieving it. While speaking over credit score and it’s rate of increasing or decreasing often has many myths. Let’s get those busted. There is no magic that can happen and would get your score to optimum great over a day or month. Also, the speed of increase also depends on the score which is currently. If the score is 450 and if the score is 650, definitely the time required to get 750 which is considered optimum best, differs. The one which has 650 will take lesser time compared to the one which has 450.

A CIBIL Score is a three digit number which is determined by payment history, the amount owed, new credits, credit mix and length of credits. Where, 35% is comprised of payment history which means how one has been making payments over the tenure of credit accounts opened. Credit consists of the credit card usage and the loans taken. 30% is for the amount owed. The total amount that has been taken, I.e. the credit limit one has for the credit card and the loan amount taken also has a major role in making the credit score. Length of credit history is 15%. How long have been the credit accounts are open, is the factor that is also considered. Rest both, new credits, credit mix are given 10% each. New credits are the one which is applied. But, if there are multiple attempts for opening new credit accounts can drag the score down. As it makes the creditors think that one is in dire need of funds which is also called credit hungry behavior. Credit mix is the combination of a secured and unsecured type of credit along with the fixed and revolving type of credits. These are the parameters and the weightage of them.

Now, on individual history, these scores are made. Any mistakes in these parameters will mess up with the score. The details information is mentioned in the CIBIL report. How long have been the account open, how and when are the payments made, any defaults, missed or delayed payments are all mentioned in the report. Also, the inquiries made for applying the credit are also mentioned. The first score is established after 6 months of an active account. Then the score is updated almost every month. Credit utilization is also a factor which affects the score. This is specifically for credit cards. One should not use more than 35% – 40% of the total credit limit of the card one has. To increase the score, the first and the foremost thing which has to be done is rectifying the old mistakes. There may be any missed payments, default accounts, unpaid dues, etc. work on them. Talk to the banker, tell the issues you had. Try clearing all those first. Then, use your credit card upto 35% of its limit. If your usage is more, apply for a new card. And use the mix. As you apply for a new card, new credit factor is also considered. But yes, do not overdo! Try taking a secured loan, say a gold loan or secured credit card. This will be a good of credit mix as well.

Once this is achieved, make sure you do not miss any more payments or delay in payments. Organize the payments. Keep reminders. Do not miss the repayment dates. While you follow this practice for over few months, a good credit score is no far! Again, there can’t be any finite time that is calculated to get a 750 score, but it is always achievable if the above mentioned points are taken care of!

What error  you  can  avoid while  building a credit score

A good credit score can be the ultimate key you can hold to unlock the best financial opportunities in life. Not only a good credit score can help you with various loans and credit cards, it can also help you land on your dream job. It can act like a boost when your future landlord conducts background verification on you. A good credit score can help you in many ways you cannot imagine.

What many of us do not know is that, building a credit score is equally hard as maintain the score. Unfortunately for many people who were starting on this epic credit journey a decade ago had no idea on how to start and how to dodge the blind spots when it comes to credit scores. Fortunately, today you have all the information you need at your finger tips when it comes to starting your journey to build a good cibil score. You have different websites as well, which helps you with free cibil score check to make better credit decisions. With all the information you need, are you still confused? Are you not getting the right gateway to start your credit journey? Are you still on the grey when it comes to identifying the blind spots of credit report?

Today we will help you understand and avoid the most common errors and also tips to build your credit score,

Apply for a credit card

What better way to start your credit journey other than having a credit card in hand. A credit card is one type of unsecured loan which you can use. You will have to make the payment of the credit limit used within 50 days of time. A credit card if managed properly can help you with financial marvels like reward points, add-on cards; you can even apply for another credit card on the basis of your primary one. On the other hand, if you default any payment, you can take a serious hit on the cibil score which will stay on your report for at least seven years.

Apply for a consumer durable loan

If you are denied a credit card because of no credit score, you can apply for a consumer durable loan. A consumer durable loan is the best and easiest way to enter the credit world and it can also help you build your credit. There are a lot of vendors who are entering the consumer durable market as the market has potential. When purchasing a product, you have multiple choices when it comes to lending options.

Avoid getting into debt

Once you open a bank account and start transacting on the same, you are on the financial radar. You will receive a lot of calls from different company’s telesales department who will offer you various loan options. Avoid them and take a loan only if needed. Just because you have an attractive offer in hand, does not mean you will have to take a loan. Many people make such mistakes and end up being in debts. A healthy tip would be to avoid such calls and if needed a loan contact your primary bank branch for loan options. Some banks provide you pre-approved loan options towards your account considering your financial transactions.

Be patient

As we all know, Rome was not build in a day. Similarly you cannot expect your cibil score to go up in a very short span of time. You will have to be patient and gradually see your score go up. Like explained in the earlier point, you can opt for credit cards and other financial options to get your score up eventually.

If you are still not sure on how to start building your credit score, you can always seek professional help. There are companies dedicated for such tasks which can help you build a healthy score for future financial transactions. No process is hard if you know how the process works, be educated about credit facts and start your credit building journey with ease.

Mistakes to Avoid When Building Credit History

If you want to be responsible towards your financial security, then it’s important that you build a high credit score with the help of good credit history. However, in that endeavor, you want to be careful with your actions and avoid the common mistakes that people commit only to hurt their score. These are:

1. Closing Old Accounts

It’s true that with few bank accounts and credit card accounts you can manage your finances easily and get the desired results faster. However, if you have to close a few accounts, then picking the old ones can do more harm than good.

Here is the thing- the length of credit history plays a huge role in your credit score calculation. In other words, your oldest accounts make a bigger contribution towards your score in comparison to your recent accounts. So, if you have to close an account, it’s best to choose one that’s relatively new.

2. Late Payments

Late payments, whether we talk about personal loans or credit cards, are never good for your credit rating. In fact, the majority of top credit bureaus such as TransUnion CIBIL, Equifax, High Mark, etc. give the highest weightage to the payment history when calculating your credit score. So, if you miss only a few payments, then your credit history will stay good. However, if you fail to make the payments on time more often than not, especially in multiple accounts, then you can expect a huge damage to your creditworthiness.

3. Increasing Credit Utilization

You may have a reason to believe that increasing credit card usage i.e. credit utilization can help to build a high credit score faster. On the surface, that seems logical, after all. However, that’s not how the system works.

Higher credit utilization doesn’t have any impact on the credit rating growth. In fact, if it’s above 35%, then it can easily cause damage instead. This is because the credit rating agencies associated high credit utilization with “credit hungry” behavior. In other words, they are led to believe that the user isn’t financially reliable which is why they are utilizing a large portion of the credit available at their disposal.

4. Carrying Credit Card Balance

A lot of people don’t know exactly how the “minimum payment” feature of credit cards work. They just assume that everything is fine as long as they make these payments.

In theory, minimum payments are a good option. After all, you don’t have to pay any fine and so your credit score shouldn’t be hurt either, right? Wrong!

It’s true that by making minimum payments you can prevent the penalties and/or extra charges. However, you may still suffer in the long run. This is because when you make a minimum payment, your balance amount is carried over to the next month and becomes debt. So, if you continue making minimum payments again and again, your total debt will increase which not only gives rise to financial challenges but also impacts your credit score calculation.

5. Failing to Monitor Credit Report

When people want to increase their credit score, they often to their friends and relatives for guidance. If they are lucky, they get some valuable insight and tips such as expanding the credit variety, timely payments, the option of secured credit cards, etc. However, a lot of times they don’t get to learn about the significance of credit report monitoring.

If your credit report has discrepancies, then the credit rating agencies will continue to give you a poor score even if you are making all kinds of efforts. Plus, you can’t monitor your progress unless you monitor your report and actually measure the impact of your actions.

All the credit rating agencies in India are required to provide every user a free credit report once every year. Thus, there is no reason for you to not get yours.

Building a good credit history isn’t too complicated or difficult. However, having sound knowledge of the same is the key. In that regard, the mistakes explained above can be of great help to you. Good luck!

5 Steps to Clear Old Debt from Your Credit Report

It’s nearly impossible to enjoy a perfect financial life in which you don’t miss a single loan EMI or a credit card bill. Most people make a slip at least once in their life. However, the good news is that your bad debt or past financial mistakes are automatically removed from your credit report over time.

If it’s been a long time and your old debt hasn’t been removed from your free CIBIL report, then you can take the following steps:

1. Compare Multiple Credit Reports

There are many credit rating agencies in India but only 4 of them are at the top and referred to by the majority of traditional banks and NBFCs. These are CRIF High Mark, Experian, CIBIL TransUnion, and Equifax. You can compare them to identify the one that’s showing the old debt.

2. Contact the Concerned Credit Agency

Now that you know where the problem lies, you can contact the appropriate crediting bureau directly. Fortunately, all the top credit rating agencies allow the users to raise disputes through their websites in a convenient and simple manner.

3. Contact the Bank

You must also contact the bank which submits your financial details to the credit rating agency. Sometimes, they submit wrong information which results in a poor score or a bad remark on your report. In this case, they may fail to report that your old debt has been cleared.

Taking the case up with your lender can easily resolve the issue if they find out that the fault was on their side.

4. Approach the Upper Management (Optional)

If you have obtained a satisfactory resolution with your bank, then you can skip this step. However, if they haven’t done the needful or are simply unresponsive to your concerns, then you can send an email to the head branch. You can visit the official website of your bank and raise the issue there.

You also have the option to pay a visit to the banking ombudsman which acts as a quasi-judicial authority that was created to provide resolution of the complaints of banking customers.

5. Wait for the Changes

After the mistake has been acknowledged, the changes will be visible over a period of a few weeks. This is because the credit rating agencies update the records periodically. In most cases, you shall be able to see the bad credit fix in your report in a month or so.

Preventive Solution for Old Debt Damage

If you want to protect your credit score from unwarranted damage due to carelessness on your bank’s end, then it’s important that you check your credit report from time to time. This will allow you to check for issues like old debt, wrong repayment information, discrepancies in personal details such as name, address, bank account, etc.

All the credit rating agencies in India are required to offer the customers one free credit report every year. So, there is nothing stopping you from getting your free CIBIL report today! You can simply visit CIBIL’s official website, create an account, answer a few questions for verification, and that’s it! They will send your report to your email address within minutes!

Monitoring your credit report is also beneficial for the following reasons:

Identity Theft and Frauds

Identify thefts and financial frauds are still rampant in India. The main reason behind it is the lack of awareness. Most people realize about these only when it’s too late. However, by monitoring your credit report on a regular basis you can identify anomalies such as unrecognized bank accounts or credit card accounts, unfamiliar loan inquiries, etc.

Healthy Credit Score

By checking your credit report, you can monitor your credit score changes. So, if you notice your score dropping, you can take appropriate measures to bring it back to the normal level again.

Discrepancies

Mistakes in your personal information and credit information can lead to a poor score. However, by identifying these mistakes and getting them corrected, you can easily prevent the damage.

When it comes to credit management, then the majority of problems can be averted or resolved by simply knowing the right plan of action. In that regard, this blog can be of great help. Good luck!

 

How Does Different Credit Bureaus Work

Before jumping to the main topic, Let’s know that what is the credit bureau? And what mainly does it do. A Credit Bureau is an organization who generates and maintains the credit score and credit report of any individual. These both are nothing but a direct reflection of how credit responsible any individual is. There are various factors which these bureaus determine while generating, updating, and maintaining the score and the report. Various algorithms are working on the credits and the repayments of credits any individual has taken and is repaying. It also majorly depend upon the banks or the NBFCs who update them with anyone’s proceedings of the credits. If in case, a bank or an NBFC fails to do so, it directly affects the score.

Everyone who has dealt atleast once with credit score or credit report knows what do they both mean. A score is a three-digit number between the range of 300-900 which is obtained by calculating various factors and report is the detailed information about the accounts. Where are the credit bureaus and how many of them will know the information? In India, there are 4 credit bureaus viz. TransUnion CIBIL, Equifax, Experian and CRIF HighMark. The first ever bureau was TransUnion CIBIL which was established in 2000 with the association of TransUnion, An America based Credit Bureau. CIBIL stands for Credit Information Bureau India Limited. Over the next few years, other bureaus came and established themselves. In 2010, RBI(Reserve Bank of India) passed a mandate that each and every bank or an NBFC(Non-Banking Financial Company) has to update any information regarding the credits which includes any type of credit card or loan of an individual to the credit bureaus.

Credit score consists of 5 parameters.

• Payment History

• Amount owed

• Length of credit history

• Credit Mix

• New Credit

Check the following table which determines the weightage of each of the above-mentioned parameters in respective credit bureau.

TransUnion CIBIL

Equifax

Experian

CRIF HighMark

In Percentage(%)

Payment History

35

35

35

35

Amount Owed

30

30

30

30

Length of Credit History

15

15

10

10

Credit Mix

10

(Inquiry) 10

15

(Utilisation)15

New Credit

10

(Accounts in Use) 10

10

10

Now, as per the details mentioned above, the 65 percent of any credit score comprises of the payment history as in how responsible the person has been over past years in making the payments of the credits s/he had been taking is considered. The amount owed is how much is the total credit anyone has taken, this includes the credit card limit as well as a loan. And the rest three factors revolve around the total length of credit history i.e. from how long has an individual be taking credits, credit mix i.e. what kind of credits one has. Secured or unsecured and revolving based on fixed credits. New credits are the new type of accounts (not be mistaken by bank accounts) or the credits which one opens. In here, Equifax has a different name as Credit inquiry which is the number of times one has inquired about any kind of loan or a credit card. The loan would be any of the loans like, home loan, education loan, car loan which are basically unsecured types of loan. And the accounts that are in use. Also, CRIF HighMark considers the credit utilization instead of credit mix.

There is no much difference between any of the factors which determine the score. There is hardly 5 percent change. So when the credit score is calculated is more over the same with just 20-25 points change. There can a major difference when a bank would not update any of the bureaus about a transaction. That can happen sometimes, that a particular bank would update the information to 3 bureaus and skips one or there is no tie up with any of the individual bureaus. When anyone checks the detailed report, it can found about which information is missing. Majorly if there is any change, it would be of 50 points maximum and shouldn’t we worry about, as taking the above points into consideration.

But, one should always be responsible for his/her credits and should not take them casually. The weightage may differ in any of the bureaus of the parameter but, an individual’s behavior would make the creditworthiness better or worse. So, one has to be mature enough in taking the credit repayments seriously!