What’s In Your Credit Report

Your credit report contains information regarding your credit history. The report shows the kinds of credit that you use, whether or not the bills have been paid on time, status of your credit accounts, loan repayments and the duration for which your accounts have been open. A credit report gives lending institutions a full view of your credit history. Besides this, the report is used by the credit bureau to generate your credit score. Banks and other financial institutions will take credit score and report into account, along with other details, to determine if you are eligible for a loan.

 

Enquiry and account information are two important aspects of your report that are studied in great detail by financial institutions. The enquiry information contains details regarding your loan applications. If financial institutions see multiple enquiries have been made in a short period of time, they will be cautious about entering into an agreement with you. The reason being, multiple enquiries reflect a credit hungry behaviour, which is a put off for lending institutions. The account information section shows details concerning your credit facilities. It contains the name of the lending institution, account number, kinds of credit facilities, loan amount and EMI payments.

 

Besides the account information and enquiry information sections, a CIBIL report will also contain CIBIL score, personal information, contact information and employment information. CIBIL score is a three-digit number ranging from 300 to 900 and the closer the score is to 900, the better. The personal information section contains details regarding name, date of birth and identification proof such as PAN number, passport number etc. The contact information will contain the address and telephone numbers. And finally, the employment section will reveal your monthly as well as annual income.

 

Your CIBIL report will reveal a number of things about you to the financial institutions. It shows the lenders how well you manage finances, if you are financially disciplined, whether you can be trusted with repayments etc. They will determine your creditworthiness by what they see in your report.  Hence it is very essential to maintain a healthy report and a good score. If you get the opportunity to avail freebies such as free credit report India or check my CIBIL score online free, make every use of it.

 

It is important to review your report just like you do for bank statements. Get into the practice of checking the report at least two or three times a year to avoid any unnecessary surprise. By regularly checking the report, not only can you spot errors (if any) and get them corrected, you can ensure that you do not fall victim to identity theft. If you see open accounts that you had nothing to do with, bring it to the notice of the credit bureau and the respective financial institution.

 

The Credit Information Bureau of India, at the moment, does not provide free credit reports. However, according to recent news articles, the bureau will soon begin to provide individuals with one free credit report a year. They are likely to begin doing so by the end of the year, according to news reports.  The purpose behind this is to help people check their scores and raise a dispute if they spot any discrepancies.

 

While you may not be able to avail free credit report India from the credit bureau right this moment, you can check free credit report India from the website of Freescoreindia. Freescoreindia has tied up with Credit Sudhaar to provide free credit reports. I, as a client, can also check my CIBIL score online free through the company website. In order to check my CIBIL score online free, I would be required to provide basic information regarding name, email ID and contact number. The reason why I, as a client, am trying to check my CIBIL score online free also needs to be stated.

 

It is of utmost importance to check your score and report at regular intervals. Hence if you ever see the option to check free cibil report India or check my CIBIL score online free, do not let it go. Be wise and stay updated about what is in your credit records. Striving to maintain a healthy report and a score above 750 will help ensure that you have a smooth financial journey.

 

Should You Check Your Credit Score?

Credit score was something that was unheard till almost a decade and a half back.  Now it is not only discussed occasionally but it has become almost a necessity if one wants access to formal credit. If one were to approach any bank or financial institution for a loan the first thing that the prospective lender will do is get the applicant’s Credit Information Report (CIR). All financial institutes access the CIR when they want to assess a prospective client but you as an individual if you want to see how your credit health is or you want to know how to boost your credit score by looking at the grey areas in it then should you do it? Will checking you CIR have any impact on it? Is it a good idea to check your score? Well if you have any doubts the ensuing discussion is just for you.

 

Hard Enquiry V/S Soft Enquiry

To understand whether checking one’s credit rating impacts it in any way let us understand the difference between a hard enquiry and a soft enquiry. When a Financial Institution or a bank ask for the CIR of an individual it is known as a hard enquiry and as the chart alongside shows it has a 10% bearing on the score calculation.  When an individual checks his/her credit score then it is known as a soft enquiry and has no bearing whatsoever on the calculation. So checking your own score will not impact the credit rating unlike a hard enquiry; too many enquiries can impact the credit rating adversely. In fact one has the option of getting a free credit score also; you should check you score from time to time owing to the reasons explained in the following paragraph.

 

Why Should You Check Your Credit Score?

Now that we have established that checking your own score does not impact it negatively let us focus on why is it beneficial to check your own score periodically. Let us assume that you want to buy a new car during the coming festival season and you apply for a car loan; the loan application is rejected due to a low CIBIL score and you end up missing the special discounts.

Checking you score from time to time makes your prepared for a situation when you may require a loan in the future and beyond loans also if you apply for certain jobs. Yes! You read it correct a poor credit rating could hinder your job prospects too just like it hinders the borrowing prospects. Recently in their recruitment advertisement SBI had asked applicants to check their score before applying. If the rating is low due to some reason, being prepared in advance gives you sufficient time to try and increase the score and be ready to apply for a loan and a job too.

Accessing you CIR also gives you a comprehensive picture of your financial health. Thus beyond loans it could help you in financial planning and also course correction if you are too over leveraged, are late in making payments or there is some unpaid due which you have forgotten about. Looking at your credit report you get a summary of all your open loans, their remaining tenure and so on which can help you prepare for your future. Sometimes there may be an erroneous reporting in the CIR which may impact the score negatively although you might not be at fault. An occasional look at the CIBIL Score can warn you of such a situation and you can take timely remedial action.

So to answer the question asked at the start of this discussion; yes one should check their credit score. Checking you score in no way impacts it negatively; on the contrary it can help you by being prepared to deal with any situation and can also aid in financial planning.

3 Things Your Credit Score Needs

Credit Score is a three digit number but is sums up a lot of factors and reveals a lot of information. It offers a peep onto your credit history, your financial health and of course how responsible you are towards your debt. Five major factors go into making or breaking the credit rating; they are repayment history, credit utilization, loan tenure, credit mix and the inquiries made about your CIR. These factors ultimately decide what that three digit number will be.  So what are the three lifelines for a good CIBIL rating?

  1. Timely Payments:

This is one thing which one cannot ignore if they want to have a blemish free Credit Information Report (CIR) or want to improve CIBIL score. This factor impacts the calculation of the rating the maximum.  So the biggest favor one can do themselves is to pay on time, always! Paying on time cannot be a one of event, it is something that needs to be inculcated as a habit and discipline; one cannot do it for a few months and then go lax on it. Repayment history contributes maximum to the rating calculation and each missed or delayed payment is reported to the credit agencies. So be it the monthly credit card payment or the loan EMI ensure you are nor late in paying them.

  1. A Cautious Approach:

We all love new shiny things and that little plastic thing (your credit card/s) may look like a genie that we have in our hands. However if you are not cautious then that genie can quickly turn into a devil. Here I am not talking about only overspending which of course can cause problems but also about a high credit utilization ratio. While spending too much on your card can put you in a fix at the end of the month, a high credit utilization ratio can also harm your credit score. Keeping your credit utilization ratio below 40% will ensure that your CIBIL score does not take a hit. Credit utilization is the ratio of the average monthly spending on the credit card/s vis-a-vie the overall sanctioned limit for the card/s. Apart from that another area in which you need to exercise caution is; applying for a loan. Each time you apply for a loan the prospective lender seeks your CIR; this is termed as a hard inquiry and is reported to the credit rating agencies. Hard inquiries also lower the score. So apply for a loan only when necessary and after doing sufficient research about the lenders loan process so that your application is not rejected which will make you apply for a loan again and generate another hard inquiry.

  1. Stay Faithful to Old Debt:

If one has surplus funds you may think about repaying or that SBI Home Loan or that education loan from Bank of Baroda. However think before you do so! A long well serviced loan is good for your credit report. Deeper the credit history the better it is; so though repaying may sound like a good option but consider its impact on the rating. Similarly if for any reason you need to surrender one credit card if you have multiple cards then consider cancelling the newer one. Of course this needs to be done after considering all the advantages and disadvantages or you could keep both cards and use the older one occasionally and remember to pay on time. This way it will still reflect in the CIR.

 

The above are three things that can help you stay in good credit health; these are not the only ones but they are definitely on the top priority list. So follow the above and you will never have to worry about your Credit Information Report.

 

 

 

Why is it necessary to check your Credit Report?

The information in the credit report can have significant effects on one’s financial life. It determines how much money we can borrow to pay for our dream home or car and how much interest is charged on those borrowings. These days, insurance companies also offer discounts based on a person’s credit health. Credit reports even affect one’s job prospects as many employers use it to assess the reliability of the prospective employees.

You should review the report periodically to make sure that the people who are accessing it to take decisions that affect you, get a true picture of your creditworthiness. Flawed credit reports have damaging consequences. It brings down your Cibil Score and costs you a lot of money in the long run in the form of high interest rates.

Here are some reasons why you should make it a practice to check your report once every year.

You are planning to apply for a loan

If you are planning a big purchase and thinking of taking a loan for it, you should first check your credit report before approaching any bank. It will give you a fair idea of your credit standing and provide you clues about you chances of loan approval. A credit report affects the amount of money that you can borrow and the interest rates that you have to pay on those borrowings. If you have a history of late payments, high outstanding balance or collection accounts then the chances of rejection are high. In this case you should first work on improving your credit. An unnecessary inquiry on the report which is unlikely to qualify you for loan will further bring your score down.

 Your loan application got rejected

If a bank denies you loan because of bad credit, you are entitled to a free copy of your credit report from the bureau from where the bank accessed your report to evaluate your credit worthiness. You must request for the report within 60 days of denial. Analysing the report will help you identify the reasons for rejection. It will provide an insight into what habits you need to change to improve your credit picture. If you’ve been handling your finances responsibly and the denial came as a surprise then the credit report may help to uncover inaccurately reported information.

You are looking at rebuilding credit

If you want to recover from your past credit problems, reviewing the credit report is a good place to start. Your credit report contains data about most of your financial accounts. Analysing how much debts you owe and how much is past due will give you a clear focus on how to fix your credit. You will be able to nail down exactly which factors are bringing your score down.

Ensure accuracy

Just as you keep a check on your credit card bills and bank statements to ensure that everything is in order, in the same way you should check the credit report periodically to ensure it is free from any errors. If you find any inaccuracies regarding the amount you owe or any other payment details submit a dispute immediately. Delays in resolving these issues can have a serious effect on the credit history.

 Check for identity theft

Attacks on information databases and identity thefts have become very common these days. You may not even realize that your identity has been stolen for months and years if you do not keep a check on the credit report. It is better to be vigilant about your credit early on because an identity theft can bring an unexpected dip in your credit score and ruin your ability to get loans in the future. Studying the report will help uncover any unusual activity or misuse of identity. If you find accounts that are not yours or transactions that are not made under your knowledge then you may be a fraud victim. Report it to the credit bureau immediately.

Co-signed a loan

If you have co-signed a loan with a family or friend to help them obtain finances then you should keep a close watch on your credit report. Any late payments or defaults on such loan will appear on your report. Periodic checking will warn you and expose problems before a serious damage occurs.

It is better to play safe than regret later. So mark your calendar or set a reminder to check your credit report at least once every year and shield yourself from a lot of risks.

How to Keep Track of Your Credit Score Easily

Your credit score is a benchmark number for your credit worthiness. The banks and financial institutions always request your CIBIL score details before accepting a loan or credit card application. If you have a good score between 750 to 900 points you are considered as a less risky prospect for granting a loan. Thus it is very important to maintain a good credit history and score.

In order to keep track of your credit score the easiest step is the first step. All you need to do is keep a track of your credit report. For this, simply check CIBIL score online for free time or make a quarterly schedule for the same. If you fail to study your CIR regularly, chances are you could be affecting your score unknowingly. Sometimes a missed-report by bank is enough to bleed the score. So keeping a track of the report ensures that you keep a track of all of your credit activities.

With credit report in hand you would know how many loans and credit cards you owe. You can easily calculate your income to loan ratio. Your credit percentage should always be 45 % or below the income level. If EMIs for credit card expenses and loans other than home loan total more than 25 % of your income you should consider it inappropriate. As long as you could maintain a manageable income to loan percentage you are less likely to fall into debt trap and miss the payment.

To maintain a decent score, it is mandatory to have a clear credit history wherein there is no lapse in repayment. Thus timely payment of loans and bills is one of the most important steps to add to your credit score.

Some tips to ensure timely repayment of balances-

  • You can try to put all your bills details handy in one place so that you don’t miss any of them ever. Use a computer excel sheet or maintain a journal for the purpose.
  • You can also consider to make a habit of paying out on a same day each month. This avoids least management of bill payments.
  • Always carefully note down the last due date for payment. It is a good habit to make payment well in advance rather than enjoying the last day ride.
  • Use an automatic payment via your bank account. This ensures regular payments. However you would need to make sure your account holds enough funds always. Check bounce can have a very negative impact on your score, so beware of this fact always!

When you study your report, be vary of any mistake in personal information or account information. Re check if all the credit related information is true. If there is an error, you should raise a dispute with the bank at the earliest. Also, never ignore an unidentified query or action on CIR.

Other than your repayment habits, your card plays a major role in maintaining a good score. As it is easy and convenient to use a plastic card for your day to day expenses, it is easier to increase CIBIL score with that card, provided you keep clearing the card balance before the due date every month. Unpaid credit bills and large card balances can heavily damage the score.

 

When you keep a good care of your credit score, you can be future safe for credit. Another way to increase the score is to keep your old credit card account with good history with you. Never close this card. Old card would not only grant a positive and longer credit history but would also emphasize on unrestricted repayment history. These two factors make you a desirable prospect for credit.

 

However you should not use your card for all expenses. For, your credit utilization would be very high in that case. You should instead use up to 30 per cent or lesser credit limit provided to you. This helps you maintain a healthy CIBIL score. Sometimes bank might offer you better credit limit on account of your good credit rating. Accept the increased limit as it will improve the credit utilization further and help your score. The increased limit should never be a means to increase the expenses.

 

Last but not the least, you should also pay attention to the accounts of the co-signors, joint account holders, or for the ones’ you signed as guarantor to. If any of these parties fail to repay they would directly damage your report as well.

All in all it is easy to manage the score if you follow these tips.