Till How Much Time Will Negative Information Be On My Credit Report

Credit Reports are all about your credit history and information related to your loans and cards. There are details about when the loan was taken, how much is the loan, when you missed a payment, when you pre-paid a loan and so on. A common question that comes to mind is, till what time does each information stay on your report. A few questions that may arise in mind are:

  • If I missed a payment a year back will it be there on my report?
  • I applied for a loan about 6 months back, a hard inquiry for it was made by the bank, will it still be there in my report?
  • If I settled a loan about three years back will it be there on my report?

All of you might have similar questions about your credit report, so let’s find out that till what time does any negative information stay on your report, well we are not so bothered about the positive information.

How Long Does Negative Information Stay on the Credit Report?

Credit reports have the different type of information that relates to your debt. Each type of information is treated differently when it comes to score calculation and the duration for which it stays on the report also varies. Below we discuss the duration for which different information stays on your CIR:

  • Missed and Delayed Payments:

Accounts information section of your credit report contains information about the repayment history of your debt including various loans and credit cards. Repayment history is the most important aspect when it comes to credit score calculation; this section contains payment details of all loans and credit card dues for last 36 months apart from all the other details about loans and cards. So if you missed a personal loan or a home loan EMI it will continue to reflect in the report for 3 years and every time your report is pulled in the meantime it will be reflected in it. Of course, recent defaults impact the score calculation more than older defaults but the older defaults (up to 36 months) do stay in the CIR.

  • Settled Loans

Settled status for a loan is one of the worst things to have in your credit report and what’s more is that it stays on your report for seven years. When you pay all your loan dues diligently than the loan status is shown as “closed”. However, when you do not pay the whole amount that you owe to the lender but pay an amount less than what is owed to the lender then the loan status is shown as “settled”. A settled loan always raises red flags for future lenders as they are not sure if you can be trusted to repay your dues in full. A settled loan will show in your report for seven years which is a pretty long time; getting fresh credit with a settled account status could be difficult so think carefully before you decide to settle a loan. Of course, a loan that is settled more recently than a loan that was settled years back is viewed more negatively but the impact of a settled loan may be influenced by other factors on your credit report too.

  • Credit Enquiries

When you apply for a loan, the first thing the prospective lender does is seek the applicant’s credit report; this is known as a hard inquiry and is reported in the CIR. Each hard inquiry impacts the credit rating and lowers it. However, if you decide to check your own score then it has no impact on the credit score. It is recommended that you get a free CIBIL Report or a credit report from other bureaus once in a while to assess your credit health. Hard inquiries stay on the report for a period of 24 months but only enquiries made in the last 12 months impact the score calculation, after that even though they will feature in the report they will not impact the rating.

So now there is more reason for you to be careful with your debt. Irresponsible treatment of debt could remain in your report for the duration ranging from 2 years to 7 years as discussed above and could impact your chances of getting fresh debt.

 

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The Laziest Way to Improve Your Score

There are a lot of things in life which you want to do. There are many of us who try to find the easiest or let’s put it this way find the laziest way to do things.

There are a lot of people who spend a lot of their energy in maintaining a good credit health and find ways sitting online finding solutions on how they can improve their score. Most of us know why we should maintain a good credit score and how that can help us the long run.

But is there a laziest way to improve your credit score? Well we have good news for you today, yes! There is a lazy way to build your credit score positively.

Usually a credit score is a number which ranges from 300 to 900. If your score is anywhere ranging between 750 and 900, it is considered to be a great cibil score. This score range can help you get any type of loan in no time. With such score you can opt for maximum amount of loan sanction and also can negotiate further with the lender on interest rates and processing charges.

A good credit report will add good value to your financial lifestyle if adhered properly. An individual with good credit report enjoys a lot of privileges offered by financial institutions and lenders which helps the individual in long run.

Here are easy ways to improve your credit score,

  • Older the account, better

The age of your credit roughly contributes 15% of your overall cibil score. The credit bureaus always give priority to applicants who have longer credit reports. Would you lend money to an individual who just started or someone who has a credit history of 10 years?

A bonus tip would be to never close a credit card account if you have one. Just try making small transactions every month and make the payment on time, this will help you to improve the score and also will make the account old. This will help you get your cibil score up.

  • Let the bank make your payments

There are a lot of promotions going on in today’s market which endorses auto payments. If you have different loans on your account, you will have to make all your payments on time. What better way to opt for auto payments. In such scenarios the bank will take care of your payments, you just have to maintain sufficient balance. This service is absolutely free of cost and you do not have to worry about EMI dates, the banks will take care of it.

Making payments on time contributes a whopping 35% of you credit score.

 

  • Stop credit hunting

Do not fall for the tele calling companies who call you explain great offers on loans and credit cards. We always fall for such gimmicks and end up making a hard inquiry on our credit report which then hampers the cibil score.  These hard inquiries made by different lenders remains on your report for two years and when in future you genuinely apply for a loan, these may cause you problems. Credit inquiries accounts for 10% of your cibil score.

You can get your credit score a boost without even making inquiry. Only inquire when in need, do not fall for mouthwatering offers by lenders.

  • Piggyback

This is the easiest way of all. You can improve your cibil score by becoming an authorized user on someone else’s credit account, this is called piggy backing. If a family member like father, spouse has a good credit history, you can tag along with them becoming an authorized user for their account and this will boost your credit score. This is like an ultimate trick used by people to get their credit score up in no time without any efforts.

Just make sure the lead account holder makes all their payments on time and maintains a good credit health, or else this practice can also turn out to be dangerous as the lead with hampering their own can hamper your cibil score as well.

If managed correctly a credit score can do a lot of financial miracles in your life. Mantling a good cibil score is no rocket science, all it needs is good financial integrity which will help you in long financial runs.

Age Of Free Credit Score: True?

From January 2017, the Reserve Bank of India made it mandatory for all credit rating agencies to provide a credit report without any cost once a year when a request is made. This means the agencies have no obligation to provide a report themselves, thus if you need a report then you have to expressly make a request as per the guidelines laid down by the agency to get it. Well, does this guideline by the RBI actually translate into free credit score for all those who require?

How to Get Your Free Credit Score?

There are four credit agencies that provide credit reports for individuals in India and each has a different process for getting a credit report. Let us have a look how you can access your free credit score from each one of them:

  • Transunion CIBIL: If you want to get your free score from CIBIL you can do so by visiting the website where there is a link at the bottom of the home page for getting a free report. It’s a three step process, the applicant needs to fill a form where basic details need to be filled and then answer a few additional questions for authentication purpose. Post the details being verified the applicant can access his/her report.
  • Crif High Mark: They also have a link for getting the free score; it is on the left side bar of the home page. The first step is to fill in basic information, here the information required is more detailed, after filling the form the applicant chooses his/her order, then they authenticate themselves, after which they can download their report.
  • Equifax: If you follow the link that is displayed for getting a full free credit report you are directed to a set of guidelines where you are instructed to download an app for the same. The applicant will need to login to the app using a temporary PIN, authenticate themselves and login again after 24 hours. You are given four attempts to answer three questions related to your credit history; once you have completed all steps successfully you get the report on your phone. Those who do not have smart phones can get the report by sending a scanned copy of an identity proof and address proof along with the application form at the mentioned email id.
  • Experian: There is no separate link for a free credit report but once you click on the link for getting a report, it takes you to a form where you fill in details as required, get an OTP and then generate a password. After this, you can almost immediately access your report.

So is it Really the Age of Free Credit?

Yes, it is the age of free credit. Each organization has a different process, for some, it is slightly cumbersome and for others, it may be simple and quick. Irrespective of that fact, all rating agencies do provide a free credit report almost immediately or after some delay. If the process is followed the applicant can access their reports if they wish to do so.

Since there are four rating agencies, effectively one can get four credit reports in a year which makes one report each quarter. In case someone wants more reports than that (which is unlikely) then the option of getting it free might not be there.

So what does it mean for you?

Being updated about your credit health has many benefits. It allows you to spot any errors in the report and get them rectified if required, you can improve CIBIL Score by assessing the reason for it being low, and looking at report can also help you detect signs of any identity theft if it happens. Checking your report has many positives, now it costs nothing and it also does not lower your score.

So it’s up to all of you out there to make the best of the situation and stay credit healthy by checking your credit score regularly and that too without paying anything!

 

What Credit Scores Should I Avoid?

There are four credit rating agencies that score individuals on a score of 300 to 900, with 300 being the lowest and 900 being the highest. CIBIL being the first rating agency is almost synonymous with credit scoring in India.  The importance of credit scores has been growing over the years and so has an awareness to an extent, however, a lot still remains to be desired in the area of awareness about credit rating, their importance and what constitutes a good credit score. Here we try and explore the importance of credit score and what credit score should be avoided and for what reasons.

Importance of Credit Scores:

Unlike before when loans were sanctioned based on the referrals by account holders or the bank’s manager’s discretion now a more objective process is followed. This process involves the applicant meeting the eligibility criteria which also entails that the applicants have a basic credit score. Though lenders do not put it in their eligibility criteria a range or a number for the credit score, below which they will not accept a loan application but it is the first step in the application scrutiny process.

Each lender may have a different threshold for the credit score, below which they might not accept the loan application; it also varies as per the loan type and other factors too like the employment record and so on. The lenders might be more flexible if the applicant is employed with an organization with which the lender has a tie-up or in case of secured loans.

However, despite some variations that may occur in the acceptable level of the credit rating that maybe be acceptable for getting a loan, its importance in the loan application process is definite. So it is a good idea to access your free credit score from time to time and assess your credit health from time to time.

The Scores to be Avoided:

As we discussed in the first paragraph the scores can range from 300 to 900; most loans are sanctioned to those applicants who have a score equal to 700 or above 700. Thus ideally any score below that is avoidable but as we said loans are given based on many factors and credit score is one of the most important factors amongst all these aspects that influence the credit sanctioning process. A good credit score does not ensure that a loan will be sanctioned (in case documents are not complete or other eligibility criterion is not met) but a low score will definitely ensure that the application does not go beyond the first level of scrutiny. So what scores should be avoided:

Score between 700 and 750:        Acceptable

Any score between 700 and 750 is perfectly acceptable in most cases and almost all lenders will be willing to extend the loan to the applicant. However, if it is an unsecured loan of big ticket size then the lender might want to take some extra steps to establish the suitability of the applicant.

Score between 550 and 700:        Avoidable

This is a score that is definitely avoidable as it reflects irresponsible credit behavior. Lenders will be willing to lend to an applicant with this score only after taking some steps depending on how low the score is. Lenders may seek a guarantee or collateral or may lend at a higher interest rate. Working in an organization that has a tie-up with the lender may help in getting the loan sanctioned. In such a scenario if will be better if the applicant tries to increase CIBIL score before applying for any loan.

Score between 300 and 550:        Highly Avoidable

Needless to say, this is a position that no one wants to be in. With such a score it is almost impossible to get a loan from the organized lending sector. This indicates very irregular repayment history and maybe loans have been written off and so on. If one has this kind of score then it makes no sense for them to even think of getting a fresh loan, they should focus on first on improving their credit health.

Avoid any score below 700 as it is not about getting a loan sanctioned but it is also reflective of the overall credit health of a person.