My Credit Score Disappeared! Please Help

Is it possible for a person to have no credit score even when a few years before he had an excellent credit history? Can this change happen all of a sudden? What should one do if one finds himself in such a situation? Let’s get the answers to these questions.

As you may very well know by now, the credit score is a number that is generated based on the information that is recorded on your credit report. If you own credit cards or have taken some debts, then the lenders keep updating the information relating to your accounts to the bureaus. An impeccable payment history and a low credit utilization helps in raising the score. Information relating to late payments, too many debts, high utilization ratio brings the score down. But whether the information reported to the bureau is positive or negative it eventually falls off the credit report. In order to ensure that new positive information keeps getting added to your report you need to keep your credit profile active.

There may be situations like the ones given below, due to which your credit report wasn’t updated with new positive information. If such is the case, your score would show a downward decline.

  1. Overseas- If you travelled abroad for several years and closed all your credit cards and other debts before leaving, your credit history will start fading away. Credit bureaus in India only record information relating to accounts opened within the country. So if one plans to return back after a few years, and wants to maintain his CIBIL score, he must keep at least 1 account open and active, by charging few expenses every month and paying the full balance at the end of the billing cycle.

 

  1. No credit- If as a part of a debt management program, you decided to go all cash and stopped using credit cards or other debts, your credit score will start falling after a while.

 

  1. Using spouse’s credit- If after marriage, you closed all your accounts and depended only on your spouse’s credit, your own credit score will disappear over time. Without a good score, you will have a tough time getting approved for credit, in case you require it in future.

Check your free CIBIL report from the three credit bureaus and find out what your current situation is. If your credit score disappeared due to these reason, don’t despair. There are many ways to rebuild your credit history once again. But you will have to get back to taking loans and using credit cards. Here are some credit building ideas which can help you establish a good score once again.

  1. Secured credit cards- Without any credit score it may be difficult for you to get approved for usual credit cards. But in order to display good credit behaviour one needs to have an active account. A secured credit card is a good way to get a small credit line. You need to make a deposit to get this card, which basically serves as a credit limit. The deposit shields the card issuer from any risk of losing money due to non-payment of dues. Make regular on time payments on this card to ensure positive information gets recorded in your report. With a good payment history and low credit utilization you will see a raise in your score.

 

 

  1. Personal loans for low CIBIL score

Another way to build up on credit history is to take an instalment loan like a personal loan. There are many private lenders who given personal loans even to people with a low CIBIL score. They charge a higher rate of interest to cover up for the extra risk that they take to lend to individuals with a low score.

  1. Authorized user

If you become an authorized user on someone else’s card, the account information will be recorded in both the credit reports. On time payments and low utilization maintained by the primary card holder will benefit your score as well.

If you do not have any new account reported in the past 6 months, or an open credit account that is older than six months, your credit score will start declining and slowly disappear. That is why it is always recommended to keep old accounts active and open.

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Will All The Credit Score Check Hurt Your Score?

There will be a lot of articles available on various websites which would give you a lot of information on how credit score works and how to maintain it. What many websites do not inform you are how your credit score gets hurt and what the factors which hurt your score? There are many factors which influences your credit score, building the credit score is rather hard than one mistake taking it for a toss. Your credit report will give you a clear idea on how you are doing financially and how other banking institutions look at you in terms of credit worthiness.

Imagine you are about to book your dream car, you have managed to save some money for down payment of your car. You are thinking of getting a loan as supplement for your vehicle purchase. Now, you are not sure what your credit rating is and if the credit report will help you get an auto loan. You plan to do a cibil score check before you apply for a loan but one of your relatives stop you from doing it explaining if you check your credit report you may end up hurting your score. You have less time to think about it and your dream to purchase that car starts to fade away. What would you do? Will you take the risk and check your score? Will your personal inquiry on your report hurt the score? Is yes, by how much?

There will be a lot of things which would run in your mind, especially when you have different opinions getting thrown at you. Do not worry, we are here to help.

First of all, let us just understand what influences your cibil score and what their shares are.

These are the main factors which influence your cibil report,

  • Your payment history (35%)
  • Number of debts (30%)
  • Age of your credit (15%)
  • Types of credits on your account (10%)
  • Credit inquiries (10%)

Yes, Credit inquiries have some weightage to your report, but this can hurt your chances of getting a loan harder than any other factors mentioned above.

There are two types of inquiries,

Hard Inquiry vs. Soft Inquiry

Hard inquiry

Whenever you apply for any type of loan or a credit card, the banks or the Non-banking financial corporation conducts background verification on you. With your residential, professional verification the lender also conducts verification on your credit report. Every inquiry made on your cibil report by the lender is termed as a hard inquiry which hampers your cibil score and you may end up with low cibil score. A hard inquiry stays on your report for 7 to 10 years which can be seen by your future lenders. If there are multiple inquiries made on your cibil report at short span of time, the lender may deny you a loan thinking you are not credit worthy this is why the past lenders did not sanction you a loan.

So the next you get a call from various credit card telesales department, understand that your yes to them will lead to hard inquiry and we all know the credit card companies are always strict in terms of verification and may deny you a credit card. You may end up having a hard inquiry on your report without a credit card in hand.

Soft Inquiry  

There are many individuals who know what the importance of having a good cibil score is. Many people check their credit score from time to time just to evaluate how they are doing financially and if they are credit worthy for future. If you, yourself are inquiring about your credit report, it will be termed as a soft inquiry. This inquiry also stays on your report for a very long time, but the lenders don’t mind soft inquiries. These days, there are corporate companies who check your credit report to check how you manage your finances so that they can offer you a job.

It is important to check your report from time to time so that you are ready with a strong report whenever there is a need of urgent loan in family. Not only for financial purpose, a strong report will help you in many ways in life.

Will my credit score be affected if I inquire frequently?

Taking loans to fulfil immediate financial requirements has become quite common. With this the importance of credit score has also increased manifolds. People have realized the importance of keeping the score high so that they get approved for loans easily, get the best credit card offers and the lowest interest rate possible. Even people who do not plan to take a loan in near future are keeping a check on their score, so that they don’t face any problems in future, if they need funds in case of an emergency.

Enquiring about your credit score helps you gauge your current situation, identify accounts that may be causing damage and find out ways to improve your credit profile. But some people have a misconception that such credit enquiries can damage your credit score. It is a complete myth that checking score frequently harms your score.  There are some credit enquiries that are not good for your score. But those are hard enquiries. When you check your score yourself it is known as a soft enquiry. Let’s explore what hard and soft enquiries are in more detail.

When you submit a loan application, the lender requests for your credit score and report from the credit bureau. They use this information to analyse your past borrowing behaviour.  Based on your score, they estimate the risk they are exposed to and accordingly decide whether to approve or reject the loan application. This score is also used to set interest rates and other loan terms. This type of enquiry made by the lenders is called a hard enquiry. All these are listed in your credit report and make up 10% of your score. While a single enquiry may result in only a slight dip, frequent hard enquiries indicate that you are applying for credit frequently. Such a credit hungry behaviour isn’t good for credit score. So one shouldn’t apply for multiple credit cards within a short span of time.

Soft enquiries include credit enquiry made by landlords, employers and insurance companies.  Since these situations do not lead to accumulation of debt they do not affect your credit score. Even the background check made by lenders for preapproval of loan is a soft enquiry. A check made by credit card companies to see whether you qualify for promotional offers is also a soft enquiry. Similarly checking your own credit report is also counted as soft enquiry. Soft enquiries are not listed on the credit report and they are not factored in credit scoring models. Hence, they do not affect score negatively.

In fact checking your score is a good practice, it is often the first step in improving it. It helps one do a reality check as to how one’s credit habits are affecting the credit profile. In order to encourage people to take their score seriously, RBI has mandated the bureaus to provide a free credit report every year. Checking the report frequently also helps in keeping problems like identity theft at bay. One must check the free credit report every year to uncover any mistakes or inconsistencies.

So go ahead and check your free credit report as and when you want to. It will not have any negative effect on your score. In fact you can get a free credit report from each of the three bureaus every year. So you can check your report for free thrice in a year. It is a good way to keep track of your financial health.

If there is a sudden drop in your score, it may be either due to recording of incorrect information or misuse of identity. One can report such issues to the bureau and ask them to rectify the mistakes. Taking a peek into one’s credit score also motivates one to take actions to bring positive changes to the score. If you are working towards improving score a regular check will help you see the results of your efforts.

Will My Job Hurt My Credit Score?

Money is an important aspect of life. You almost need money to complete every task in life. Where do you get the money from? That’s right, by doing a job. A good job can determine what you do, where you stay, what you wear and how your lifestyle can be. Your job can impact you in lot of ways both directly and indirectly.

Will it impact your credit score? Absolutely not! Your jobs, the designation, take home salary, bonuses, etc. does not get reflected in your credit report. This does not mean your salary does not have power on your loan buying process. For example, you are applying for a credit card; the lender will ask you for your annual salary to set a credit limit on your card. This way your job indirectly contributes when you apply for a financial product or a credit line.

So what exactly may hurt my credit score?

Payment history, debt levels, age of credit, types of accounts and inquiries on your credit report are the five main factors which contribute to your cibil score. Your employment status, your incomes and gains are never reported to the bureaus.

If unfortunately you lose your job for some reason, that can indirectly affect your credit score and you will end up on the loan defaulter list. Losing your job can be a saddest thing that can happen to you. You join a firm with a lot of confidence expecting your position will be intact, but when a bomb is dropped on you of unemployment, you are shattered everywhere.

Let us see how a job loss can indirectly harm your credit score,

Behind on loan EMIs and credit card payments

There is a famous proverb stating “Money brings Money”. When you happen to be in a job, there are a lot of bankers and card lenders who offer you different financial products like loans and credit cards. Though we know, they are just our want not need; even then we tend to go ahead with it. Because you have a stable job and a fat cheque, you start spending and get used to a lavish lifestyle. After losing your job, you realize that the EMIs are pending and the credit card bills are overdue and you have no money to make the payment. This will definitely result to a dip in your credit score.

Take new loans to pay your bills

Now that you know that you are in deep trouble financially after losing your job, you will opt for a new loan. A new loan will come with new terms and a new EMI, because it is an urgent requirement you may end up paying more processing charges than usual. You may also try to get in touch with your credit card vendor and ask for a limit raise. Limit raise totally depends on the sole discretion of the card lender, who will check your cibil score first and then think of giving you a limit raise.

 

Unexpected expenses

Trying to close one financial hole after another can be stressful but if in between this process something unexpected happens, like a family member needs medical attention then you are in for another problem in your life. This will result to you finding another loan to fill this gap.

A job hunt

Maintaining a good credit score is really important, even if you have lost your job. Many employers check your credit report to understand your financial capability and determine if you are job worthy. A bad credit score can cost you your next job. So no matter how bad your financial situation is, always pay all your debts on time.

You should always save money and keep some amount as reserve for unexpected events in life. Even if you lose your job, the reserve money can help you keep going for at least till the time you find another job. Spend less, always focus on what you need rather than what you want, this will definitely help you in long run to save money and live in financial harmony.