Who Owns my Credit Data?

Even if you are a little bit responsible towards your personal finance, then it’s likely you have heard that you ought to have a high score. But who calculates your score, and who owns your credit data? The answer is “credit rating agencies”.

What are credit rating agencies?

Credit rating agencies are the firms that collect the data of individuals and companies so as to create their credit report as well as their score. Basically, they monitor the financial activities of the people through their loan repayments, spending habits, etc. and use the information to assess their creditworthiness.

The top rating agencies in India include CIBIL, CRISIL, ICRA, Experian, Equifax, etc. Some of these offers credit score of companies or individuals only, while others offer the score of both.

What types of data credit rating agencies collect?

A credit rating agency such as CIBIL is mainly interested in gathering the following information:

Length of Credit History

The length of a person’s credit history plays a big role in their credit score calculation. This is because if they have a long history, it means their financial behavior can be assessed with higher accuracy. On the other hand, if a person started using credit only a year ago or so, then it’s difficult to predict whether they are responsible towards finance management or not.

Repayment History

The repayment history is another main factor that affects the score of a person or a business. For instance, if you have taken a few home loans in the past but repaid them all on time, which means that with the majority of the EMIs paid on the due dates, then you can get a high score. However, if you have often missed your credit card bills or EMIs in the past, then the rating agency will look at it as a negative aspect and deduct points from your score accordingly.

Credit Card Utilization

Your credit card usage data is also something that the majority of credit rating agencies are interested in. This is because it alone can tell a great deal about your personality and your spending habits.

If you use more than 35% of your credit card limit almost every single month, then it shows that you are “hungry” for credit. The same happens when you apply for new cards frequently. These things work against your credit report and thus must be avoided.

Is my CIBIL score also a part of the credit data?

Not only your CIBIL score a part of the credit data stored with the credit rating agencies, it’s the most vital one. This is because it sums up your entire credit data.

Your CIBIL score is calculated on the basis of a variety of important factors/data that are shared above. So, if you apply for home loans, personal loans, etc.  then the lenders may not even need to look at your cibil report. They can just look at your score to see whether you have high or low creditworthiness.

What’s a good CIBIL score?

A CIBIL score ranges between 300 and 900. Thus, 300 is the lowest score that you can theoretically get, while 900 is the highest. That said, the floor and ceiling are rarely found in a credit report. Most lenders instead categorize the CIBIL score in four categories:

  • Poor- 350 to 550
  • Fair- 550 to 650
  • Good- 650 to 750
  • Excellent- 750 to 900

If you want to enjoy a safe and secure life finance-wise, then it’s important that you take measures to keep your CIBIL above 550. However, ideally, you should strive for achieving a score of 650 or above.

The Bottom Line

So, now you know who owns your data. It may make you feel uncomfortable, but it really shouldn’t. This is because even though the credit rating agencies collect your data and provide your score, it’s you who controls your credit report. If you instil good financial habits in yourself, then you can achieve a good score. Similarly, if you are not careful enough, then you can also ruin your score yourself. Thus, be wise, and make yourself aware of the right credit-building measures.

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Credit Score Check: Why is it Necessary?

If you have never applied for a loan or a credit card in your life, then it’s possible that you never needed to check your credit score. However, this doesn’t mean that you should check your score only when you need a loan, credit card, etc.

Even though people are learning about CIBIL and its significance, most still avoid CIBIL score check unless they really need to. This is a wrong attitude to have towards your creditworthiness.

There are many good reasons to check your credit score, some of which are:

  1. Disputes and Discrepancies

Discrepancies and mistakes in credit reports are more common than you think. This is because banks and credit rating agencies manage the records of hundreds of thousands of customers, and millions of transactions. Thus, it’s possible for a discrepancy to occur in your repayment history or personal details. That said, if it’s left unchecked, it can ruin your credit report badly which can make it difficult to get an ICICI home loan, personal loan, etc. in the future.

Only by checking your credit score and credit report you can identify mistakes if there are any, and have them corrected.

  1. Identity Thefts

Credit rating firm Experian says that identity theft is the largest contributor to fraud in India. In other words, you are always at a risk of someone trying to impersonate you in the financial sphere and rob you of money. However, you can prevent yourself from becoming a victim by simply conducting a CIBIL score check every once in a while.

If you notice a sudden drop in your credit score or an unusual activity in your report, then it can be a sign of an identity theft. So, you can immediately contact your bank and get it checked.

  1. Score Improvement

You can’t predict the future. Even if you are financially strong today, you never know when you may need a personal loan down the road. However, in such a situation you must have a high credit score to get one without having a hard time. This is again where the importance of checking your score comes in.

If you want financial security, then you must monitor your score. Most importantly, you should never delay taking the initiative.

  1. To avoid further damage when about to apply for loans

Whenever you apply for an ICICI home loan, car loan, or rather any type of loan, the bank checks your credit score. If it’s high enough, they approve your loan. However, in case it’s not, then they can reject your application. However, that’s not the only way how it affects you. In addition to a lost opportunity, you also risk damaging your score too. The reason behind this is credit report inquiries.

When a bank requests a credit rating agency to provide your credit report, it’s called an inquiry. So, if one bank rejects your loan, then you may apply at another bank, and then once again, and again multiple times. This means a lot of inquiries are made to the credit rating agency. This is bad for your score as it shows a credit-hungry behavior.

The problem can be avoided by checking your score before submitting your loan application. This is because if your score is low, then you can wait until you have made it better.

With a high score, your chances of getting a loan approved are high. This means there are few inquiries, and thus low to no damage to your score.

  1. Better Interest Rate

Checking your score also allows you to enjoy great interest rates. This is because when you know you have a high score, you can use this information to get leverage when discussing loan details with your bank.

Banks know that a person with a high CIBIL score is likely to repay their loan on time. So, they don’t mind offering a lower interest rate than the standard for you.

Your credit score plays a big role in your financial matters. So, be sure to check it every once in a while. Besides, it’s free. So, why not?

Is My Income Part Of My Credit Report?

There are a lot of people who do not know what a credit score is and how it is calculated. Many of us only come to know about a credit score after a loan or a financial product gets rejected. After getting such news you try to get your credit report to understand where you went wrong and start making attempts to build up your credit score. While building a score from scratch, you will try finding easy ways to get the score up in no time to avail a financial product. You make all your payments on time, use less limit on your credit card but you do not find a significant impact on your report. Suddenly something clicks in your mind, can my salary be a part of my credit report?

The answer to this question is a NO! Your salary or any type of monetary gains can never be a part of your cibil report. Other than income, factors like, color, race, religion, marital status, gender, occupation, where you live, etc. do not contribute to your credit score.

There are a lot of factors which contribute to your cibil score but salary is not one of them. Factors like your payment history contributes 35% to your score, the amount owed will be 30%; length of credit history contributes 15%, 10% of new credit and 10% on types of credits used.

A credit report is designed to analyze your financial behaviors and if you can default a new line of credit. It makes the lender’s job easy to understand if you are credit worthy and if they can provide you a loan or a financial product. The lender will definitely check your incomes and gains to understand your repayment capability but it will also check your credit report for any past defaults.

One of the reasons why your salary is not listed on the report is because the credit bureaus seek information from lenders, creditors and collection agencies; they do not take any self-provided data from consumers as they may have fake information. The employers also are not comfortable sharing the packages to bureaus as this kind of information is confidential. There can be instances, the competitor company can pull any employee’s records of how much package are you offering and can headhunt your candidate, as credit report information is easily available these days.

How can you bank on your income?   

You can use your income to do a lot of things financially. You can invest in insurances, which is termed to be good investment. The payments you make for your insurance policies are reflected on your report which than helps you improve cibil score.

There are instances, when you need urgent funds and you cannot rely on your family members. You can show your stable income proofs to the bank or any lender for a quick loan which can help you with quick funds. When lenders make decision on giving you a line of credit, your salary is always a key factor while considering your credit worthiness.

Once you have availed a loan, make sure to make timely payments to the bank, so that your credit score up rises from time to time and when the time comes, you avail a bigger loan like a home loan or a luxury car loan with ease.

The other ways to bank on your salary in financial market is to apply for credit cards. Credit cards play an important role in everyone’s life if used properly. A credit card can be a boon at emergency times and can be a source to quick funds. If you have a good income structure, you can apply for a credit card with good upper limit. Card lenders consider your salary and gains when they accept application to determine if you are a car worthy individual and also what would be your credit limit. Owning a credit card can help you many ways including improving your credit score.

If you are on the way to build a good credit score, don’t feel bad if your salary is not considered as a component to calculate your cibil score. You can use other ways to build a good score, where your salary can play an indirect role. Just utilize your salary wisely and make all your payments on time, you will see a great hike on your cibil score in no time.

How to Make a Good Credit Score Even Better?

We live in a time where having a good score is crucial for financial security and a comfortable life. However, the question is- what exactly is a good score?

Generally speaking, if your CIBIL score is below 600 then it’s considered a low CIBIL score, and if it’s above 750, then it’s considered a good score. But here is the thing- you should never be happy with your score.

It should be one of your continuing goals to improve credit score even if it’s good enough. This is because if you stop caring, your score can drop over time and become a “poor score” one day without you even knowing. In addition to that, working towards the best possible score ensures that when you need a loan or a credit card, then you are able to obtain them without any problem and at attractive terms and interest rates.

How do you make a good score better?

There are many things that you can do to take your score from “good” to “great”, such as:

Don’t Break the Streak

Since you don’t have a low CIBIL score, it means that you have been paying all your loan EMIs, insurance premiums, and credit card bills on time. So, if you want to increase your score, even more, it’s important that you never break this habit. In fact, you should do whatever it takes to never miss a single payment.

Your repayment history is one of the biggest factors to affect the credit score. In some credit rating agencies, it can make for as much as 30% to 40% of your entire score! Thus, the only way to improve credit score on a constant basis is to be punctual with your payments at all times.

Create a Healthy Credit Mix

Did you know that by simply increasing the variety of credit in your report you can easily increase your credit score by 10% to 20% or even more?

A lot of people are able to push their score only to a limit because their credit report is based on just one type of loan or credit card only. So, if this is the case with you as well, then you can add new credit profiles to your portfolio and see the magic happen! For instance, if your experience with credit in life is only on the basis a personal loan, then you can apply for a credit card or a car loan. You are sure to notice a major improvement in a short period!

Develop a Habit of Frequent Report Checking

If you can’t remember when the last time you checked your credit report was, then it’s something to worry about.

Monitoring your credit report is extremely important when you want to increase your CIBIL or credit score as much as possible. This is because it helps you track your progress and alerts you when or if your score starts to drop.

Checking your CIBIL report frequently also helps you prevent identity thefts and other frauds that can rob you of your savings and even greatly harm your credit profile as well.

Put an End to Your Credit Card Debt

If you love to use credit cards but make minimum payments more often than not, then it’s possible that you have a huge debt on your card(s) which is really bad for your score.

Although technically you are allowed to make minimum payments to avoid penalties and other kinds of charges on your credit card bills, from your credit score’s point of view, it’s bad. In fact, if you apply for a new loan then it’s quite possible that the lender will reject your loan application even if your score is high because of your high debt.

When it comes to credit score, it’s important to remember that you must not rest on your laurels once you have secured a good position. You must always pay attention to your finances to ensure that your score not only stays high but also makes an improvement over time as well.