How to enhance your loan eligibility

Every bank follows a credit appraisal process in order to determine a borrower’s loan eligibility. It checks the CIBIL score of an individual, and assesses the CIBIL report, income and other documents to determine whether the borrower is capable of repaying the loan on time or not. By working on the credit profile and improving credit score one can increase the chances of approval.

Here are some ways that can help you increase your loan eligibility.

Longer tenure of loan– Repayment capacity of the borrower is a major factor that banks consider before sanctioning a loan. If the monthly instalment is higher than what the bank thinks you can afford to pay, then your eligibility will be affected. Opting for a longer tenure will reduce your EMI liability and enhance your eligibility. Though a longer tenure will increase your net interest outgo it will at least make you eligible for the loan. 

Additional income-Showcasing that you have a high steady income helps to increase your loan eligibility. Keep a record of the variable perks or performance linked pay that you earn from your job and add them to your income. Mention the other sources of income such as high interest fixed deposits or rental income on the property that you own. Such additional sources of income will enhance your repayment capacity and increase the amount that you are eligible for. You may need to furnish supporting documents as proof of the additional income. So keep them handy.

Step-Up Loans- Step-Up loans are a great way to increase the loan eligibility. For people who are in a profession where there is struggle in the initial years, but surety of a good financial status going forward, this is an easy way to borrow funds. Here an individual pays a lower EMI in the initial years. The EMI progressively increases with the tenure of the loan. Here the eligibility increases as the future income is expected to increase as the borrower establishes himself in his profession.

Prepay-existing loans- If you are considering taking a home loan, then prepaying your outstanding loans like a car loan or a personal loan, is a good way to enhance your eligibility. The EMI that you are already paying on the existing loans reduces your monthly repayment capacity and impacts the home loan amount that you may be eligible for. For example if your monthly income is Rs 1 lakh, the bank may consider your repayment capability as Rs 50,000 as EMI. But if you already have a personal loan where the EMI is Rs 20,000 this will be deducted from the amount that you can afford. So to arrive at the eligible amount, the bank will consider your affordability as Rs 30,000. Hence it is advisable to prepay these loans before making a home loan commitment.

Co-borrower-The assessment of the repayment capacity of the borrower largely depends on his income.  The EMI is generally half the take home salary. But if it falls short of the required limit you can bring in a co-applicant. If your spouse is earning, then it is a good idea to make a joint application. Pooling two incomes together enhances the loan eligibility amount to a great extent. This also means that the liability of repaying rests on both the applicants.

 Work on your CIBIL score- CIBIL score is an important factor that determines loan eligibility. Hence you should make all efforts to improve credit score. Check your CIBIL report and score regularly. If you notice an errors then dispute them immediately. Pay your monthly instalments and credit card bills on time. Use your credit card wisely. By keeping the utilization levels below 30% of available credit limit you will ensure that you improve credit score.

When you work on the important aspects (like income and credit score) that the bank evaluates in order to make an assessment, you can surely enhance your loan eligibility.

 

Reasons why errors on your CIBIL Report can be Destructive

Priya wanted to gift a new card to her parents on their anniversary. She chose the car, model and color keeping her parent’s choice and requirements in mind. She then applied for a loan, she knew it would not be difficult to get a loan as she had all the required documents and she had also maintained a good credit history. Her loan was rejected due to a low credit score and she was almost shocked as she had always been a responsible borrower. On going through her Credit Information Report she was shocked to see that there were delayed payments reported in it. She had never missed a payment and it turned out it was a reporting error by the lender.

So Priya missed a chance to gift her loved ones at the right occasion, this could have been avoided if she had been pre-emptive and had applied for a free CIBIL Score and checked if the score is acceptable to the lending agency. Despite being meticulous in her credit habits she had to face some problems.

How can errors in your CIBIL Report be Destructive?

While for Priya it was disappointment, a low CIBIL score can cause bigger problems too. It can result in financial loss, missed opportunities and a lot of wasted time and effort for no fault of yours. Being credit healthy is important and it could be doubly distressing if despite being a careful borrower your score is low due to an error in the report. While these errors can be rectified and once they are removed from your report they will enhance credit score but sometimes the delay can cause a lot of trouble and loss too. These errors could be wrong reporting of a default in payment, a loan or credit card that does not belong to you being reported under your name which will reduce your borrowing capacity and if there have been any defaults on that loan they will also be include in your score calculation.  Here are a few ways in which these errors can be destructive:

  • Cause Loan Rejection: If a lender reports that you have missed a payment or the loan is reported as settled erroneously then this could cause some serious trouble for you. Not only your credit rating will take a hit, a look at the CIR will scare away the lenders. No lender wants to lend to a person who does not pay on time or is a default risk. Thus the lender will not know that the reporting in the CIR is erroneous and they will reject your loan application without a second though whatsoever.
  • Harm your Job Prospects: This may not seem like the most obvious impact of an error in the CIR but could be more harmful then getting a loan rejected. Imagine not getting the dream job or losing out to a competitor in the final round of interviewing due to an error on your report which can cause you to appear like an untrustworthy candidate or somebody who is debt ridden. Increasing number of employers are seeking credit check of prospective employees along with a background check and a health check. This is to ensure that the employee that they hire is trustworthy and will not get into legal trouble due to unpaid dues. Thus an error could cost you dearly at a job interview.
  • Credit Card Application Rejection: An error in the CIR could also cause a new credit card application to be rejected. If your CIR show you have a high utilization ratio, missed payments or have a “settled” status account in your report even erroneously it could lead to the card company rejecting your application. While you can certainly apply for the card again after rectifying the error but sometimes the delay can cause more than expected trouble.
  • Make a loan more expensive: Errors on the CIR can lower your scores which can cause lenders to assume you to be a high risk borrower. This can make them charge you higher interest rates on loans then they would have charged otherwise. Higher the risk, higher the interest you are charged so you can end up paying more interest on a loan for no fault of yours.

The best way to avoid getting into a situation like this is to get your credit report from time to time so that you are aware of any errors in it and get sufficient time to rectify it. This will ensure that you do not suffer any losses because of these errors.

 

Does a change in the spelling of your name or surname impact CIBIL Score

Consider the following three situations:

  • Vikas has a three credit cards and he is late in paying the bill by a few days on almost all three of them since the last few months.
  • Priya is getting married next month and is planning to change her name and adopt her husband’s surname post marriage.
  • Ayesha has a home loan which she plans to prepay in the coming few months using the performance bonus she is expecting.

Which of the above three situations is likely to impact your credit score and in what way?

  • Delayed payments by Vikas are harmful for his credit score, the more frequently he does it the worse it is. He will have to remedy his ways and will have to figure out bad credit fix soon to rectify this situation.
  • Priya changing her name or surname or both post marriage or otherwise will have no impact on her credit score whatsoever.
  • Ayesha pre-paying her loan will give a temporary jolt to her credit score but it not something that will have a lasting negative impact on the credit rating.

Name Change and Its Impact on the Credit Score:

As we said above changing the name or the spelling, adopting a new name, adding a surname etc have no impact whatsoever on the CIBIL score. The credit rating calculation is based on five parameters which are as follow: repayment history, credit mix, utilization ratio, credit inquiries and age of credit. Personal details like name, age, sex or contact details etc are not taken into account when calculating this score. Another aspect that needs to be kept in mind is that the income levels of an individual also have no impact on the calculation of the score; however lenders may want to have a look at the debt to income ratio or length of service etc before deciding whether they will lend to an individual or not.

When one changes their name all the details about various loans, credit cards and their repayment etc are carried forward in the new name. Past history whether good or bad is not erased so the score remains whatever it is without any impact on it due to name change.

Since CIBIL gets all data from lenders you need to inform the lenders as well as the rating agency about the name change so that the necessary changes can be made in the records. You will have to update the records with all the lenders from where you have running loans and also with credit card companies. They will make the necessary changes and the records are carried forward in the changed name.

You need not close or surrender your cards due to a name change; you can just inform the credit card company and get a new card issued with the changed name spelling without the need to close or surrender a card. This will ensure that older accounts remain in your credit trail which is good for the overall credit rating.  Women when getting married and changing their name/surname or adding their spouses name need to be especially careful. They should make sure that they get the necessary changes made so that their credit history is carried forward. Failing to do so, they may find it difficult to get a loan or credit card sanctioned in future in absence of any credit trail. It is also important to keep old accounts active and running to have a deep credit trail which gives a better picture of one’s credit behavior.

Though change in name does not directly impact the credit score it may cause delay or hassles if one is looking at applying for a card or a loan in the ensuing period. Change in the records of CIBIL does not happen immediately so they find themselves in a tricky situation when applying for new credit. This can be avoided to an extent by writing to CIBIL directly rather than waiting for the lenders to do so. Also ensure that you have sufficient time lag between the name change process and apllying for any fresh credit.

 

Is all the hype on credit score justified?

If one had applied for a loan a decade or so back, they would have required the relevant documents, knowing the bank manager or knowing somebody who knew the bank manager and could “introduce” the applicant. Knowing the manager or being introduced to the manager ensured that the lender knew about you being a reliable borrower or a trustworthy person which could not be established by simply looking at the documents. Lenders want to give money to those who can be trusted and this judgment was made in a subjective way in the past and often backfired. Things in today’s times have changed; now this “trustworthiness” or “creditworthiness” can be established in a more objective way; with the help of the credit score.

So What is a Credit Score?

Before focusing on the hype that surround the credit score and if it is justified or not we will try and understand what the credit score is. The credit score is a three digit number that reflects the creditworthiness and also the credit health of the individual. This rating is calculated based on the credit history of the individual; this history must be at least six months old and includes various aspects related to loans, credit cards and other credit behavior.

Based on five main parameters that are namely the repayment history, credit mix, credit utilization, inquiries and loan tenure the credit score is calculated. Amongst the five the repayment history is the most important parameter followed by credit utilization. These aspects are used to arrive at the credit score of the individual. The Credit Information Report which is a detailed contains a lot of information related to loans and the individual apart from the credit score.

Why is it Important?

So now we know how the score is calculated. So, why is it important? The score is important as it lets the prospective lender judge if the prospective borrower can be trusted or not. Let us start from the beginning. When an applicant applies for a loan, he/she submits an application along with the required documents. A financial institute will get hundreds of applications, they want to be sure that they lend the money to the right candidate, a person who can be trusted and is credit worthy. So how do they do this? This cannot be judged by simply look at the documents and the application form. This is what brings us to the credit rating.

The prospective lender will ask for the CIR of the applicant and based on the CIR the lender will decide whether to go on to the next step or not. The score is calculated based on the past credit behavior of an individual, thus the lender can make an assessment whether a person is likely to be a responsible borrower or not or is likely to default based on his past behavior and his current debt obligations.

Each financial institution will have its own set of rules and requirements when it comes to accepting a loan application or not. One of the criterions that the applicant has to comply with also concerns the credit rating of an individual. Thus those who have a score that is less than what is acceptable to the lender will not be sanctioned a loan, their application is likely to be rejected at the first step only. The acceptable credit score varies not only with the lender but also may differ depending on the loan type.

Generally a score of 750 is considered to be good enough to get a loan sanctioned. As per the statistics by CIBIL 79% of all loans sanctioned are to those people who have a score of 750 plus. If you are looking for a loan and have a score below this, it is a good idea to improve CIBIL score before you apply for a loan.

So is thy Hype Justified……

To clarify CIBIL or any other rating agency does not specify who should be given a loan or not, they just collect the data from various lenders and arrive at a score based on it. However, having said that almost all lenders look at an individual’s credit score before deciding whether to lend to him/her or not. Thus getting a loan or a credit card is heavily dependent on a healthy credit rating else your chances of getting a loan approved go down. Even if one were to get a loan with a low score it would be at higher interest rates. So yes the credit score is important and one must focus on keeping it healthy, not for the hype but for your own sake.

 

How Your Credit Score Affects Your Happiness

There are a number of things that account for our sense of fulfillment. For example, wealth, attractive job, health, etc. are some of the things that are commonly associated with our overall happiness. However, do you know that your credit score can also affect your happiness?

Your credit score is not just an indicator of your creditworthiness but also of your happiness. If you think about it, it makes a complete sense. Who do you think is more likely to be happy with their life- a person with low credit score who is struggling to get a personal loan, or a person with an excellent credit score who knows that they won’t have any trouble if they needed a loan in the future?

The following are some of reasons why a good CIBIL rating can also increase your level of happiness:

  1. Better Management Equals a Comfortable Life

It is extremely difficult to build a high credit score without being good at managing things, and without being responsible. It takes patience and dedication to create a good score. You have to pay your EMIs on time, do credit check from time to time, and also avoid your credit cards from collecting debt. All this is not possible if you are not good at management. However, if you are good at management then your life is also likely to be easier and you will run into problems much less frequently than others.

  1. Peace of Mind

Financial emergencies lurk at every corner of your life. If you had to move to a new city one day, or had to pay for hefty medical bills for someone close to you then it is possible that may fall short on cash and need a personal loan. Unless you have a high CIBIL score it can be really difficult to get one. Thus, when you have a good score it gives you a peace of mind that you can deal with any kind of financial problem in future should it arise.

  1. Job Eligibility

A good job is often related to your happiness, and lately it has become mandatory to have a good track record in terms of credit history if you want a job. Many companies, especially banks and other financial institutions have started taking the job applicants’ credit history into account when filtering the candidates. In fact, when SBI published an advertisement for job openings it clearly mentioned that those candidates who had ever defaulted were not eligible for the jobs.

  1. Savings

A high credit score is also linked to your savings. It has been found that the people who have a good credit score also tend to have decent savings which can be helpful in rough times. Since decent savings means comfortable life, they also attribute to your general happiness.

So, by now you must have got a good idea why a high credit score is important for your happiness. If you are not satisfied with your current score then you can always improve in by doing a few basic things, which are:

  • Paying EMIs and Bills on Time: The best way to increase credit score is by paying your loan EMIs and credit card bills on time. Credit bureaus regard this habit with great admiration and show it in your credit score.
  • Credit Report Monitoring: If you want to avoid developing a poor credit score then it’s best that you inculcate a habit of checking your credit report from time to time. This has two advantages. First, you can identify errors or discrepancies in your report and have them corrected. This will immediately improve your score. Second, if you notice that your score has been dropping lately then you go through your report and find out the reason easily.

According to CIBIL’s scoring system your credit score should always be higher than 650 (as the maximum possible is 900). Any score higher than that is considered good, and you can get a loan easily. Similarly, having a low cibil score than that could lead to a challenging and unhappy life.

Guide for steps to be taken if wrong loans get reported in CIBIL report

A CIBIL Report is made after collating and collecting a lot of data. This data may pertain to loans, credit cards, payment details, individual’s personal details and employment details. Any credit rating agency be it CIBIL or some other agency just collects the data that is provided to them by various lenders and presents it in the prescribed format and uses the given data to compute the credit score. However sometimes due to error in data provided by some lender, manual fault etc there can be some errors in the CIBIL Report.  A credit check from time to time not only ensures that the person can assess his credit health but also helps one in spotting such errors.

Types of Errors in a CIBIL Report:

As we said there is a lot of information and data provided in a credit report thus there can be various types of errors. While some errors may impact CIBIL score calculation others may not. However it is important to mention that regardless of the impact of the error on the scoring it is imperative that they are rectified at the earliest.

The errors can pertain to wrong reporting of the name, address, date of birth, PAN, Aadhar and other such details. One’s employment details like name of the current or past organization of length of service etc may also be reported wrongly. These errors do not impact the credit score directly.

Then there are errors which can cause trouble as they impact the credit score calculation. These are reporting of a loan that does not belong to you, showing a payment default which did not happen, a larger than actual overdue amount, inaccurate account status (defaulted/settled), wrong loan closure details. These errors can cause your credit score to be low and require immediate attention and correction. Reporting of a loan that does not belong to you lowers your borrowing capacity and any default that may occur on that loan will be reflected in your credit report.  There can be multiple reasons for these errors like the problem may occur at the time of entry or some confusion about an address or PAN details etc.

How to Get the Wrong Loan Removed from the Report?

The first reaction of anyone on seeing a loan that does not belong to them on their CIR would be confusion and panic. However rest assured it is not such a serious issue and can be resolved. The key is to keep checking your report from time to time so that you are aware of the mistakes if any. Problems arise when a person checks their report just before they want to apply for a loan then there might be no time to get the mistake rectified. Worse still they may realize that there is a problem after a loan has been rejected due to a low cibil score. So here are the steps that need to be taken when you spot an error in the report:

  • The first step in obviously to get your CIR and go through the entire report thoroughly so that you know what it contains. Just looking at your CIBIL rating online will not help as one may not be aware of the contents of the report or about the loan listed in it.
  • The next step is to inform CIBIL about the error and register a complaint. This can be done online too. There is dispute resolution option on the CIBIL website, one can fill the complaint form, the 9 digit number from your CIBIL report is mandatory for filling this form.
  • The error may have happened at the level of the credit agency or the lender. Depending on where the error originated the next step would be taken. If the error is at the level of the agency then it can be rectified faster.
  • However if the loan has been erroneously reported by the bank then since CIBIL being just an aggregator will not be able to make any changes on their end and will get in touch with the concerned lender.
  • One can expect a resolution within 30 days of filing the complaint. If one is not satisfied with the resolution then the complainant can approach CIBIL again and if still the matter is not resolved then one can approach the banking ombudsman.

Do follow basic credit health rules and keep checking your credit report from time to time to stay credit healthy. If there is an error, don’t worry there is way to resolve it.

 

What goes into calculation of CIBIL score?

The most valuable asset that keeps your financial life sorted is your CIBIL score. This tool predicts your future financial behaviour. Whenever you apply for any loan, say a personal loan, the lenders check your score to determine the level of risk they are exposing themselves to by granting you loan. While a high score is a sign of good credit management a low score indicates that you are a risky borrower. Hence a low score may lock you out from the ability to borrow funds.

The credit bureaus use a mathematical algorithm to churn the information in your credit report and arrive at a three digit credit score. Let us solve the mystery of how this magical number is calculated. Only when you know the factors that go into the credit score calculation, will you be able to work on them so as to achieve and maintain a high credit score.

Here is a breakdown of five factors that constitute your credit score.

Payment history- This factor has the largest influence on the credit score (35%) as it portrays your future behaviour in terms of loan repayment. It reviews how well you have met your past obligations of credit cards and other loan accounts. It analyses whether you made your payments on time, how often you missed the payments, whether your recent bills are past the due date etc. It also looks at the public record items like delinquency, collections, liens, judgements or bankruptcy. If you have a clean track record of regular on time payments then you will score high on this factor. However if you have had problems in repayments, your score will be weak. The best way to gain credibility in the eyes of the lenders is to always pay back the bills and installments on time.

Amount owed- The credit scoring models give 30% weightage to the amount of available credit that you are using on the revolving accounts. The ratio of the amount that you owe to the total credit limit that is extended to you on all cards determines your credit utilization rate. This rate shows your overall dependence on credit. If you do not carry your balances to the next month you will have a high score. On the other hand high balances and maxed out credit cards will lower the credit score. As a general rule it is best to keep the utilization rate below 30% if you are trying to improve your score.

Length of the credit history – This factor accounts for 15% of the credit score and considers the age of your credit accounts. Creditors like to see whether you are able to successfully manage credit over a period of time. If you have open accounts since a long time and manage them responsibly, it gives the creditors sufficient proof of your dependable behaviour and therefore increases your credit score. If you have just recently opened an account and do not have sufficient credit history to show your track record then you may have a lower score. Because the length of the credit history affects your score, it is advised that you should not close your old credit cards as it shortens the average age of your accounts and hurts your score.

Credit mix-The type of accounts that show up on the CIBIL report, make up 10% of your credit score. If you have both revolving credit as well as instalment loans on your credit profile, you have a variety to show that you can manage different types of debt. Hence a good credit mix contributes to your creditworthiness and raises your credit score. On the contrary, having only one type of account like a credit card, can lower your score.

Recent credit activity- This factor considers your pursuit of new credit, including recently opened accounts and hard enquiries. It makes up 10% of your score. A number of newly opened trade lines or hard pulls on the credit report communicates to the lender that you are either desperate for credit or unable to qualify for credit. It signals financial trouble and lowers your score.

Knowing about the factors that constitute your score is the first step in your journey towards building your credit score. It will now become much easier to work upon your credit related actions to improve your score.

5 Ways to Build Your Credit Score from Scratch

It can be a terrifying experience to find out that your loan application was rejected due to the absence of a credit score. However, there is no reason to be alarmed as there are many people who don’t have a credit score for many reasons. If your credit history is blank, then you can build a good one in many simple ways.

The following are 5 good ways to build your credit score from scratch:

  1. Joint Account Holder

The easiest way to build a credit score to become a joint account holder with a person who already has a credit history. However, you must choose your partner carefully.

You would want someone who you trust, and who trusts you too.  This is because your credit history will be based on the kind of credit history they have as well. So, if they have a good CIBIL rating and a good history of timely payments, then your credit score will also increase. Similarly, if they tend to delay EMI payments, etc. then your will have low CIBIL score.

If you want a home loan on an urgent basis but don’t have a good credit score, or have no score at all, then becoming a joint holder is one of the best options for you. This is because the lenders generally don’t consider passing a loan “risky” then there is a joint account holder involved who has a promising credit history.

  1. Becoming Authorized User

It is not always possible to convince someone to become a joint-account holder with you. In that case, they might at least make you an authorized user.

While being an authorized user you don’t share any financial responsibility with the account holder and server only as a signer you can still get credit building advantages. The only problem with this method, however, that you may not see the results, at least for a long time. So, if you want to build credit score fast then becoming a joint account holder is a better option.

  1. Getting a Credit Card

Getting a credit card and using it wisely is another excellent and simple way to build your credit score. Since most banks love to push credit card usage anyway, it won’t be hard for you to get one for yourself. However, the real work begins when you get to spending. Here are a few things to keep in mind when you use your credit card:

  • Credit Utilization: No matter what the limit on your credit card is you must spend it wisely. Ideally, you shouldn’t spend more than 30% of the credit limit. Thus, if the credit limit is Rs. 1 lakh then you should cap your monthly expenses with the credit card to a maximum of Rs. 30,000.
  • Timely Payments: Believe it or not, timely payments are extremely important to build a healthy credit score. If a potential lender performs a credit check and finds a history of delayed payments, then it is easily possible that they will reject your loan application. Similarly, if they see a history of payments done on time then they will feel confidence in your creditworthiness and it will be easier for them to sanction a loan.
  1. Personal Loans

Personal loans are tricky to get especially when you don’t have a credit score. However, you still have a good chance to get a small personal loan. In fact, if you could manage a personal loan along with a credit card then you can get the desired results faster as a mix of different credit forms (loans and credit cards) can give an impetus to the credit score.

  1. Monitoring Your Credit Report

You can easily find your CIBIL rating online. Most of the credit bureaus of India allow the users to download their credit report for a nominal fee. If checking your credit report you find that there are some errors or discrepancies, then you can have them corrected and see an improvement in your score.

Credit building is a long-term process. Unless you already have a credit score it can be difficult to build one, and not to mention the time and effort it demands. That being said, if you can find someone who has some experience in this area then you can succeed in the endeavor easily and faster.

What you must do if there are errors on your credit report

Financial advisors always suggest that one must review the credit report periodically. The information in the credit report has a direct impact on your credit score. It determines whether you can get loans in future and how much interest you need to pay. Hence it is imperative to make sure that the data in the report is accurate, complete and up to date. A periodic check also helps guard against identity theft. You can quickly find out if someone uses your personal information to commit fraud.

How can errors crop up and what kind of errors should I look for?

Banks and financial institutions hold all the data pertaining to your credit card and loan accounts. They keep track of your payments and pass on the data to the credit bureau. If the information passed on is inaccurate then there might be errors in the credit report. Mistakes in data entry or time lag between data collection, submission and updation of details can lead to discrepancies. These can relate to your personal details for example misspelt name, wrong date of birth, PAN number etc. There may also be mistakes in the balance amount, account status or payment details. More serious errors include inclusion of credit card or loan accounts that you have not taken.

What to do if there is inaccurate information in the credit report?

However trivial or serious an error maybe, you should get it corrected to prevent any negative impact on the credit score. CIBIL has a dispute redressal mechanism through which you can report the discrepancy and get the mistakes corrected.

Fill a dispute resolution form

The first thing that you need to do is to file a dispute by submitting an online dispute form available at the CIBIL’s website. You need to furnish your personal details, the nature of the error and a brief description of the error in the online form. You are also required to fill in a control number. This is a unique 9 digit number that you can find on your CIBIL report. This number aids CIBIL in identifying the report for which CIBIL dispute is raised. Once a dispute is raised you will receive an email mentioning the dispute ID that can be used for future correspondences.

Verification of information

CIBIL contacts the concerned financial institution to verify whether the dispute is legitimate or not. Only after the credit institution gets back to CIBIL with the relevant facts and authenticates the dispute, will CIBIL go ahead and rectify the errors. CIBIL is not authorized to make any changes to the Credit report without proper verification. Only when the loan provider confirms the error CIBIL will update the records with the correct data. You will keep getting email notifications regarding the status of your request. When the dispute gets resolved you will be notified accordingly. CIBIL usually takes 30-40 days to resolve any dispute depending on the time the credit institution takes to revert back with the required information.

If the mistakes in the credit report relate to personal details or incorrect overdue amount then the resolution happens faster.  But in case you find entries of loans or credit card accounts that don’t belong to you, then it is a case of mistaken identity and it may take a little longer to resolve the issue. The law requires the bureau to come up with a formal resolution of dispute within 45 days of the dispute being raised. Once you get the resolution you can apply for the report again to see whether the changes got reflected.

In case you are not satisfied with the resolution provided you can approach the bureau again and initiate a fresh complaint. The information will be re-verified with the bank. Usually CIBIL provides a satisfactory resolution but it takes time to verify and correct the errors. So you need to be patient during the entire process.

 

CIBIL report is increasingly gaining importance. It is prudent to reflect upon it if you wish to have a smooth loan application process. You should check the report at least once every year. If you haven’t done it till now, make sure you do it at least 3-4 months before you wish to apply for any loan. In case you uncover any errors you will have sufficient time to get them rectified.

Be mindful that the errors can lead to depleting your credit score and you may be left with little options but to look for bad credit fix and apply for personal loan with low CIBIL score.

Are CIBIL Score and CIBIL Report Two Different Things?

Whenever you apply for a credit card or a loan at banks or NBFCs they perform a credit check and determine your creditworthiness. It is calculated on the basis of two factors: CIBIL score and CIBIL report. Although they both complement each other and serve the same purpose (helping lenders determine credit lending risks), they are different from each other in many ways. To understand these differences, you must first know what these two credit evaluation factors are exactly.

Credit Score

There are many credit bureaus of India that maintain and provide credit scores of different individuals to the banks and other financial institutions. Some of the popular credit bureaus include CIBIL, Equifax India, Experian India, etc. These bureaus analyse your credit history, payment patterns, credit utilization habits, etc. for your credit score calculation. Generally speaking, the higher is your score the greater is your creditworthiness. In other words, if you have a high credit score then you are considered as a responsible credit user, and lenders will find it easy to trust you with lending a loan or approving a credit card. On the other hand, if your score is less than average then your credit utilization behaviour is not considered satisfactory, and thus lenders will shy from lending you credit. Even if you are able to get a loan with a poor credit score you will likely have to pay a high interest than normal.

Credit Report

As the name suggests, your credit report contains the summary of your credit-related activities. Thus, it covers your loan payments, credit card bill payments, existing debt, etc. It also contains your personal information- name, address, contact information, bank account information etc.

The CIBIL report is divided into the following sections:

Personal information

In this section the report presents your personal details, such as name, address, phone no., voter ID number, PAN number, passport number, etc.

Employment Information

As the name suggest the “Employment Information” section contains your employment details. It includes your current occupation and income. You may find the information here outdated, as this section is updated when you get a loan for the first time. So, if it has been many years since then and you have switched jobs then CIBIL may not have updated the same on the report. You have to inform them of the same to make the changes.

Account Information

It is one of the most important sections of your credit report, as it contains your financial details which matter the most to the lenders. Section fields include your credit limit, pending debt, no. of collaterals and their values, etc.

Enquiry Information

This is another important section of the credit report. It contains the list of all the enquiries that have been made by the banks and NBFCs in the past 1-2 years. If a lot of enquires have been made in a short period of time it shows two things- that you are credit hungry, and that many lenders have already rejected your applications. Thus, it raises a red flag and affects your score negatively.

More on the Differences

It must be clear to you by now how a credit score is different from credit report. However, there is another major difference that must be pointed out. While the format of the credit reports followed by most credit bureau is similar, there scoring system can vary greatly. Thus, it is unlikely that you will get the same score from different bureaus. There are two reasons behind it-

  • Different credit bureaus use a different formula for scoring. Thus, one bureau might deduct 10 points on every delayed payment in the past 6 months, while other might deduct 20.
  • The floors and ceilings on the scoring spectrum vary from one credit bureau to another. For instance, CIBIL provides a score ranging between 300 to 900 and Experian from 1 to 1000.

Conclusion

No matter which credit bureau your lender has partnered with, developing good credit utilization habits is extremely important. Make sure you check your credit report from time to time, especially because it’s easy to get a free credit report India.  Pay your payments on time, and don’t use credit cards excessively. Even little things like these can make a big difference to your credit score.