5 Things you Should Understand About Credit Scores

Knowledge is power, and power is everything. Did you know that just the three digits that represent your credit score can have a huge impact on the financial well-being? If you have been overlooking news and articles related to CIBIL score and creditworthiness so far, then it is time to finally learn about it. The more you will avoid learning about CIBIL, the more difficult it will become for you to get loans and credit cards in the future.

So, here are top five things that you absolutely must understand about credit score:

free credit report1) CIBIL Score and its Importance

Your CIBIL score is a three digit score that is provided by Credit Information Bureau (India) Limited, the institution that collects and maintains records of every individual’s payments related to loans and credit cards. The score ranges from a  minimum of 300 to a maximum of 900.

2) Things That Impact Credit Score

There are a number of things that can affect your credit score, and thus should be given due attention to. These are:

  • Late Payments- Late loan payments, and credit card bills payments, are the most common reason behind low credit score. A lot of people don’t take payment deadlines seriously, believing that it won’t make a big difference. However, the reality is that every single payment is of significance when it comes to your credit score, and thus should be always taken seriously.
  • Mistakes in Credit Report- Your credit score is mentioned in your credit report(provided by CIBIL), which is also important. If there are any mistakes or errors either in your personal details or the payment history itself, that are mentioned in the report, then it could lower your score.
  • Remarks and Comments: The lenders from which you take loans can leave remarks in your credit report, which can be detrimental to your score if they show you in bad light. If this is the case then to improve credit score you have to request them to get them removed from your report.

3) You Can Get a Copy

The access to your CIBIL report is not restricted to financial institutions alone. You can get a copy of your report as well. All you have to do is create an account on CIBIL’s official website and submit a few documents for verification purposes. If all goes well then they will either send a report to your email address, or to your residence itself. You just have to pay a small fee for the service.

While getting a copy of your CIBIL report is an optional service, it is highly recommended so that you can keep an eye on the progress of your score.

4) Other Credit Information Companies

Although CIBIL is the authority bureau on credit management and regulation in India, there are  3 other bureaus as well that work on the same principles. In some cases your financial intuition could choose to consider turning to these bureaus as well apart from CIBIL, when considering your loan or credit card application.

Here are the 3 companies other than CIBIL:

  • Equifax: Established in 2010, the company scores individuals on a scale of 1 to 999, and is known for its new technologies and services.
  • Experian: It also scores on the scale of 1 to 999, but takes longer to provide credit report. It also offers the most cost effective means, by offering credit report for just Rs. 138.
  • Highmark: Highmark scores range from 300 to 850, and offers unique solutions such as data quality management, and credit assistance, etc. Since the company is relatively new it has some really innovative products for modern banks and other financial institutions.

5) Difference Between Free and Actual CIBIL Report

A lot of websites these days are claiming to offer free CIBIL report, when in reality they are just misleading the people. What most of these websites are offering is an estimate of your Credit Score, and not the actual credit score. If you want to improve CIBIL score then you must always refer to the actual CIBIL report, and not the rough estimates.

By being informed on your credit score and credit report, you can make sound financial decisions easily. The points explained above can be of great help in that enterprise.

 

I need a free credit report. What should I be doing

A credit report contains details about your credit history – loans, bankruptcies, credit accounts etc. The information in the report is used to generate your credit score, which is a three-digit numeric summary of your creditworthiness. Financial institutions will look at your credit report and credit score while making lending decisions. If you would like to view your CIBIL report, you would have to visit CIBIL’s official website and fill in their request form. The bureau will make available the report at a certain cost. It is important that you check your report at least two times a year to know where your creditworthiness lies. If you ever get the option to check free credit score from a legitimate source then do not let go of it.

 

At present, India’s credit bureau does not give out CIBIL reports for free. If you want to avail the report right this moment, you would have to pay a certain sum to avail it. However, recent news articles have suggested that the credit bureau is likely to begin providing individuals with one free credit report per year. The bureau is expected to begin doing so from January 1, 2017, news reports suggest. The central bank has said that the report must be provided on request, any time during the calendar year. Access to the free reports, which will be in the electronic format, is expected to raise consumer awareness and help people make more meaningful financial decisions. Now when you do avail a free CIBIL report, it is important that you treat it as a credit health management exercise. Many make the mistake of limiting themselves to checking on their report only before sending out a loan application. It is very essential that one regularly checks on his or her credit health so as to know where they stand financially.

 

If you want to check free credit score, visit the online website of Freescoreindia. Freescoreindia has joined hands with Credit Sudhaar to provide free credit scores in the country. In order to check free credit score from the website, you would be required to enter some basic information such as your name, email address, city and phone number. Once you have submitted all the necessary details and documents, your credit score will get updated to your online account in a span of 72 hours. You will also receive notification via SMS and email concerning the same. Finally, login to check free credit score.

 

It is prudent that you check your CIBIL report at least two times a year. Checking your report is the best way to know what needs improvement. If you plan on sending out a loan application, it would be a good idea to look at your report at least six months prior so as to make sure that no discrepancies have crept in. Regularly checking on your report will also help you realize whether or not you have fallen victim to identity theft. This is crucial given the rising cases of people falling victim to identity thefts. Additionally, staying updated about what your credit history looks like will help you set your financial goals.

 

Banks and other financial institutions will look at the contents of your CIBIL report to assess whether or not you are eligible for their loans. They will also determine the interest rates to charge you based on the conclusion they draw of you from your CIBIL report. If your score is low, chances are that lending institutions will charge high interest rates. Sometimes even employers will look at a candidate’s credit report to help them in their hiring decision. Landlords could also review your report when determining whether or not to rent to you. It is thus very important to keep track of the contents in your report and ensure that there are no errors of any sort. If you would like to check free credit score, we suggest you go through the website of Freescoreindia. If you come across other websites that will let you check your score or report for free, make sure it is authentic before taking things forward. Do not share yours personal details unless you are 100% certain that the website is authentic.

 

Understanding the Basics of CIBIL Report

Your CIBIL report (also referred to as CIR report) is a file that contains the information about your credit history. It contains the details of the current and previous loans that have been taken by you, bank account number, account type, list of enquiries made by banks or lenders, credit limit provided to you, etc. it also contains your basic personal information.

If you want to learn how to correct CIBIL report you should understand its basics first.

Your CIBIL report contains 5 different sections apart from the CIBIL score section. These are:

1) Personal Information

In this section your personal details are provided. Here you can find your name, date of birth, and gender. Apart from that it could also contain the details of some or all of this: income tax ID number (PAN), passport number, voter ID number, driver’s license number, ration card number, and unique ID number.

2) Contact Information

The next section that you‘ll find on your CIR is the Contact Information section. It contains your phone numbers, email addresses, and residential addresses. When a bank checks a CIBIL report this sections helps identity the account holder.

3) Employment Information

The employment section carries your employment details such as your income (either monthly or annual). The mentioned income may not be your current income but the one you provided at the time of your loan application.

4) Account Information

This section is the most information section, especially for your loan lenders. It carries your credit information such as the name of your previous and current lenders, types of credit facilities available (such as credit cards, home loans, personal loans, education loans, etc.), account numbers, payment history, current balance, loan amounts, etc. Most importantly, it contains the detailed record of your last 3 years’ payment history regarding loans and EMIs. All these factors affect your credit score and are also influence your lenders when they consider you loan applications.

Here are some of the things that you should carefully look at in the Account Information section of your report before you apply for a loan or a credit card:

  • Account Details- It contains details such as your name, account number, account type (such as home loan, credit card, etc.), date of account opening and closing, and the latest date when updated information was provided to CIBIL.
  • Account Status- If there are any settlement issues pertaining to your account or if it has been written off by a lender then it would be mentioned in the report. The same goes for when you are on a loan defaulter list. Your future lenders are unlikely to approve your loan application is they will see any mention of such things in your report. For your understanding the definitions of “Settled” and “Written Off ” are given below:
    • Settled: If you report mentions an instance where an account was settled then it means you had made it to the loan defaulter list and the lender had to settle for a lower amount than the outstanding amount.
    • Written Off– When it has been more than 180 days past the due date for a pending bill or EMI then your bank writes off the amount and reports it to CIBIL.

Both the status mentioned above affect your score negatively.

5) Enquiry Information

Whenever a bank or some other institute requests for a copy of your CIR to CIBIL it accounts for an enquiry. The information of the recent enquiries of your report is mentioned in this section. If a lender notices multiple enquiries that have been made in a short period of time then they may see it as an act of desperation and decide to reject your application.

A lot of times people get a low CIBIL score because of errors in their reports.  If you too have come across any error in your report then you can get it fixed and improve your score easily. However, to make that possible you must be able to understand your report first. The information given above will be able to give you a better understanding of CIR.

 

 

Monitoring Your CIBIL Score: What Are The Benefits?

Staying up to date with your CIBIL score has a number of benefits- you can detect emerging issues, or correct the existing ones before they snowball into bigger problems. Besides, you can save both time and money that you would otherwise have to invest if you realize about the problems eating up your credit score at a later point in time.

The importance of monitoring your CIBIL report can’t be emphasized enough, and when for a few hundred Rs. you can a copy of your original CIBIL report from CIBIL’s official website there is no reason why you should not keep an eye on your score from time to time. In fact, you can get a free CIBIL report online. which is not that accurate but can certainly give a rough estimate.

Here are the steps for obtaining original CIBIL report from official CIBIL website:

1) Create an account on CIBIL.com and upload necessary documents viz. ID proof, address proof, etc.

2) Once your account is created you can make the payment for the report, which is about five hundred rupees. However, you are free to choose any payment method such as net banking, debit card, etc.

3) Once the payment is made CIBIL will verify your credentials. You will be asked 5 questions that are based on your credit history. Correctly answering at least 3 of them will complete the authentication process, and CIBIL will send a copy of your report to your email address within 3 business days. If you fail in answering any 3 questions you will still get a report, but it will be sent to your home address instead of email address for security reasons.

What to Look For in a CIBIL Report?

When monitoring your CIBIL report make sure you check for the following:

  • CIBIL Score: Your CIBIL score is the first thing that you should check when you receive your report. Compare it with the score that you saw the last time you checked your report. If you see a drop then it is a matter of concern. If you see a boost then you can keep doing whatever you are doing to make score better.
  • Discrepancies: Every time you get a free CIBIL report online, or an original copy make sure you check it thoroughly for discrepancies or mistakes. Even a small mistake in the report can damage your score. In most cases you can rectify the mistakes by reporting them to your lending institution which will then send the correct data to CIBIL. You can check the updated report after 30-45 days and confirm the changes. Depending upon the significance of the data your score can easily increase by 50 points.
  • Remarks/ Comments: Believe it or not, the comments and remarks left by your lenders in your CIBIL report can affect your chances of loan approval in future. Even though these comments don’t really affect your CIBIL score they can influence a potential lender to cancel your loan application. If you see any negative comments in your report then you can request your bank to have them removed.
  • Remaining Debt And Payment History: Analyzing your credit report can greatly help in managing your expenses and the loans that you may have taken. This is because the report carries all the information of your current debt and payment history. You can go through it to see how well you are doing, and manage your expenses better. If you notice that you have been delaying EMIs lately then you can try becoming more regular and save your score from a negative impact.

A large number of people are looking for ways on how to “check my CIBIL score online free” lately. Fortunately, there are plenty of websites on the Internet that can provide an estimated score by using the information provided by the applicant. Still, it is highly recommended that you get an actual copy of your CIBIL report to have a better understanding of your situation.