Getting a credit report is easy, but reading the report can be tricky

Your credit report is the very first thing the lender will check if you are applying for a credit line. You will have to make sure that you are up to the mark when it comes to the credit score while applying for a loan or else there are high chances that your loan plea may get rejected.

But, is it always your fault that your credit score is on the lower side. Let us take this scenario that you are in urgent need to cash and you apply for a personal loan. You are confident that your loan will be sanctioned within the given time frame and you will be able to fight the crises you are facing. You get a call from the lender stating that your loan plea has been rejected, reason being a low cibil score. You are shell shocked that you have always maintained financial integrity and this is something you never expected to happen on your part.

You get the cibil report and find a lot of information in there. You do not know how to analyze and see where it all went wrong and you ended up on the lower side of the score. This is the trickiest part of every person who is accessing their credit report for the first time. There is a lot of information which you need to analyze and check if you are in the right path.

We, today will sight you what to check and how to check your credit score,

Credit Score

Immediately after you open your credit sheet, the very first thing which you see in bold letters is your credit score. The credit score ranges between 300-900 points. Any score which is 750+ is considered to be an excellent score which can help you get a loan or a financial product with ease. Higher the score, higher are you chances to get a loan approved and various financial institutions begging you to buy their loans.

Personal Information

The next information which you see is your personal information like name, age, address, PAN details, etc. Make sure the information displayed is accurate. If you find any spelling mistakes in your name on the report, make sure to send an email to the credit bureau with attaching necessary documents to support your plea.

Employment history

Whenever you apply for a loan or a credit card, the bank always asks for your employment information. If you happen to be in a different organization when you are applying for a loan than the last time, that information is updated on your report. If you are employed in a reputed company, there are high chances of the loan getting sanctioned in no time.

Credit accounts and repayment history

Now you have landed to the most important section of the credit report. This section contains all the information regarding your accounts and your payment history. Even if you have skipped one payment, the bank registers the same and is sent to the credit bureaus. There are high chances that the information which you see may be inaccurate, if that is the case, you can raise a dispute with the credit bureau and get it sorted. This process will take time but at least you won’t end up having a low cibil score.

Credit Inquiries

Then the last section consists of various credit inquiries you have made on your report. Only the hard inquiries are counted in this section. You downloading your own report will not be reflected on this section.

A report reading is always a tricky part. If you fail to understand the credit terms, make sure you seek financial advisory help to get things sorted.

 

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This is why you should track credit report to maintain a healthy record

Are you a health freak? Are you one of those who wake up at 5.30 in the morning and goes to work out on a daily basis? Have healthy food throughout the day and is rigorous about maintaining the perfect health? If yes, have you ever thought of your financial health? Isn’t that important as well? A healthy financial health will lead you to money miracles and if failed to adhere it can cause you a lots of problems.

What is the main essence of a good financial health you ask? It’s nothing but a good credit score. A credit score is a representation of your personality in eyes of a lender on how you are doing financially. There are ranges of credit score which will determine if you are credit worthy or not. You will pray to be on a higher of the score as it opens lots of doors to financial products to avail.

Here are some tips on tracking your credit report and maintain a healthy record,

Know your credit score

Many people make this mistake and never check their credit score on the first place. They only happen to know this term when they are applying for a loan or a financial product. Get your free cibil report and check what your score looks like. Is it bad, good, worse how much do you need to work on the same?

Keep a track

Your financial transactions are recorded frequently by your lenders to the credit bureaus. These transactions are like a summary of your financial well being and how your future lender will see you. It’s important to keep track to understand if the actions are helping you improve your cibil score.

Fix your details

Credit bureaus tend to make lots of mistake while entering your transactions towards your account. You need to check and report any errors you see when it comes to the transactions on your report. Not only transactions, but every details like your name, surname is to be rectified as this can lead to major problems like identity theft.

Only borrow what you need

When it comes to availing a loan or a credit card, always check your requirement. Do not avail more than you need as this will cause you a lot of damage financially. Just because people have pre-approved loans and open credit, they misuse their finances and then face lots of issues financially. If you think you happen to have a lot of open credit accounts than you need, try closing them with ease and try buiding a secured financial future.

Be smart when applying for a credit

When you are applying for a loan, it’s tempting to apply towards a few credit providers just to see how the market can favor you while applying for a loan. This practice can not only deny you a loan, but can also take a toll your credit score. When you apply for different loans or credit cards every enquiry is counted as hard enquiry and is recorded on your credit report. These enquiries stay on your report for a very long time and are visible to your future lenders that you made multiple applications to avail a loan in the past.

Do not miss on any payments

Life is tuff, we understand that and due to unconditional situations, you may miss on payments. Do not do that! It’s really important to make all your payments on time and maintain that financial integrity so that your credit score is maintained and you also don’t encounter any late fees and penalties.

Maintaining a healthy record sounds like a lot of work, but it can be a savior when it comes to availing a financial product. Few simple steps towards maintaining a good finance can help you in many ways you cannot imagine.

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.

The Credit Report You Haven’t Seen Yet, May Scare you

People who are careful about their physical health usually go in for an annual health check-up, just to make sure that everything is fine. Similarly people who take their financial health seriously should keep an eye on their credit score and report on a regular basis. Your credit report shows a complete record of all the credit accounts. Your credit score is calculated based on the information in credit report. Depending on how you manage your credit and how you handle the payments the credit score determines whether you are a worthy borrower. Checking your free CIBIL report every year helps in keeping your financial life in order. It helps in making sure that all information recorded about you is true and up to date. It helps in uncovering frauds in a timely fashion before the situation goes out of control.

Many people do not care about credit reports until they find a need for a new loan. Many people just check their report before finalizing a car loan, to see whether their credit profile is strong enough to help them bargain for better interest rates. If you are one such individual who hasn’t paid attention to your credit report till now, you may be in for a big surprise. You may find entries in your report that may give you a shock of your life.

Errors in CIBIL report are quite common these days. Such errors are capable of bringing a huge dip in credit score if not corrected on time. Identity theft cases are already on the rise. If someone is using your name to commit a fraud or if someone is charging credit card expenses in your name you may not even be aware of it until you check your credit report.

Finding out that your credit profile is in a mess at the time when you are seeking out a car loan is quite scary. To avoid such a situation one should regularly order the CIBIL report and check it for accuracy.  Check whether you recognize all the loan accounts and credit card accounts that are opened in your name. Ensure that you recognize the transactions made using credit card. If you spot any accounts in your report that you have not opened, any transactions in the billing statements that do not belong to you, or any collection notices that you do not recognize then it could be an identity theft case that may ruin the credit rating.

Immediately report such cases to the creditors who are reporting the fraudulent information and dispute these errors with the credit bureaus. You may also put a fraud alert to the credit report so that no new accounts are opened in your name. Follow up with the bureau till the item is removed from the report.

You should even get small errors like misspell name or address rectified. Such small errors, if not rectified on time, may become a reason for a bigger problem later on. If you want to protect your financial life you should take the complete onus of ensuring that your report is showing true and correct information. To get the errors fixed you can submit a dispute to the credit bureau through email. The bureau will contact the original source of information to verify the details. You may even send supporting document as proof to both the bureau and the creditor to speed up the process.

Apart from errors, even true information in the credit report might take you in for a surprise. Many a times, it is only when you see your credit report and analyse the factors that are bringing your score down do you realize your mistakes that you’ve been doing in the past.  A review of correct information like late payments helps in realizing that small mistakes can prove disastrous for the credit score.

With millions of consumer records being processed every day, errors in credit reports are bound to happen. If you want to avoid unpleasant surprises at the time you need your score to be at its best during loan approvals, monitor the report on a regular basis. It will help you uncover problems before they become difficult to manage. Order your free CIBIL report today.

Why is it Important to Monitor Your Free Credit Reports?

How would you feel if you want a home loan for your dream house but no bank would approve your loan application? Not very good, isn’t it? That’s exactly how Mr. Sindhu was feeling as he was becoming frustrated with the rejected loan applications that he had submitted to various banks.  After a few of his initial applications were rejected he thought he needs to try harder, and he sent many more applications to other banks simultaneously. However, contrary to what he expected none of the applications was approved. He was clueless, unsure of what to do. Fortunately, when he talked to his friend about the problem he, his friend, advised him to get a free cibil report online and analyze the same. He took his advice and got his copy of free credit report India. To his dismay he found that his friend was indeed right as he noticed that his CIBIL score was quite low.

A large number of people are so caught up with their lives that they hardly get time for paying attention to their CIBIL report. However, when a time comes when they need a loan they realize that their negligence has caused their score to suffer and so they face tremendous trouble in getting their application approved.

If you will talk to any credit management expert they will undoubtedly emphasize on the importance of credit report monitoring. Not only monitoring of credit report is a smart habit it has a number of advantages too. Here are some of the best advantages of monitoring your credit report-

1) Maintaining High Credit Score

One of the primary advantages of monitoring credit report is easy maintenance of high credit score. By regularly monitoring your report you can detect problems that are lowering your score early and fix them before a lot of damage takes place. This way you can keep up a decent score without working too much.

2) Identity Theft Prevention

One of the best ways you can prevent yourself from an Identity theft is by monitoring your credit report. By checking your credit report every once in a while you can notice the signs of identity theft. For instance, if you find unknown names, account numbers, or unfamiliar transactions in your report you could be victim of identity theft.  You can immediately contact your bank and file an FIR to prevent any further damage. On the other hand, if you don’t have the habit of checking your report frequently you could become a victim of identity theft and not even know it. By the time you come to know about the situation it could be too late.

3) Detecting Inaccuracies- One of the most common reasons why people get a low credit score is discrepancies in their report. Wrong or inaccurate information sent by your bank could easily cut a huge chunk of score from your report. By developing a habit of frequent credit report monitoring you can detect these mistakes and have them corrected by either contacting your bank or the CIBIL authority itself.

4) Managing Finances- You can manage your finance better if you keep a track of your transactions, EMIs, and credit card payments.  Your credit report carries the information of all your recent transactions, bills, and payments, thus, allowing you to easily manage your finances. You could have your own separate file of finances but a credit report works as an excellent finance summary.

A lot can go wrong if you don’t pay attention to your credit report. Many people don’t take their credit score seriously and pay heavily for the same in future when they least expect it. Thus, it is better to detect upcoming issues sooner and nip them it the bud rather than be careless and find yourself swamped in a mess of problems later.

The Importance of Your Credit Score When Looking For a Home Loan

Real estate prices in India have scaled to unbelievable heights. Buying a house, atleast in the major cosmopolitans in India seems like a distant dream for most especially because the prices have exceeded a common man’s affordability. Inspite of the recent trends in property prices in India showing a marginal downturn, they still remain far above the ground.

To cover the gap between what a common man’s pocket can allow and what home sellers are asking for, a home loan must be sought. This article will quickly walk you through on why your credit score is such a big deal when you are looking for a home loan.

How to proceed when looking for a home loan?

It is important to mention here that banks and other non banking institutions that provide housing loan and are also member of CIBIL, withdraw a loan applicant’s credit report as a first step in evaluation of the loan application. Whether the applicant is seeking a secured debt or an unsecured debt it does not matter. Even for a thing as minor as a request for an upward revision of the credit limit on your credit card, sends a bank looking for your credit report. Most banks and other lenders are known to grant credit to those who have scores greater than or equal to atleast 750. Thus, what’s applicable for any other loan is applicable for home loan too. You should do a cibil score check every year to keep a eye on your score.

Banks and other non banking financial institutions do have their internal policies on credit scores and reports but none of them have ever openly disclosed their criteria. However, by and large 750+ scores are considered as very good score to get through the loan process at any bank, unless you lack a document or fail on other parameters of the lender.

How do I know my score?

Knowing your score is not complicated at all. You can get online and go to cibil’s website . Here you can request your copy of CIBIL report. After a payment of Rs. 550/- you can easily and instantly get yourself access to your score and report. Incase you do not want to invest money in withdrawing your report then you can also go to http://www.freescoreindia.com and request for a free credit score. Although free but you will receive it only three days after you have submitted a complete request. So, if you are not in a hurry, you may consider this alternative.

I know my score, now what?

Once you have received your copy of the report then give it a thorough look. Look at all the details carefully and make sure that they are all correct. Incase you find any false information then it is best to raise a CIBIL dispute and request for a rectification. The reason why you should be so cautious about all the details to be right is because there could be information that is hampering your score. Upon correction of that misleading information, not only will your score improve but also it will become easier for you to impress upon your prospective lenders.

For example, you may have paid in full an old used car loan some time ago but the lender has not reported this to CIBIL. However, the report shows the loan account as still “open” and running. Since CIBIL’s authority is limited to only collating data from its various members, it cannot update unless it has been notified from the bank itself. Thus, by having your data corrected, it will bring down your used credit limit and help increase your score.

I have a good score. Can I use it to my advantage?

Ofcourse! It may come as a pleasant surprise and it is true. Often we have heard that people with poor scores need to worry and not those with good scores. But that is so untrue. The truth is a good score helps the borrower more than the lender. This is so because it not only it means that you can easily seek credit upto the limit of your eligibility but also you can negotiate for favourable terms and a lower rate of interest. Banks and other lenders will be vying for your loan portfolio incase you have a good score. Therefore, you can certainly take advantage of competitive rates.

Are there any loans for someone with a poor score?

Well, ofcourse. Even with bad credit home loans can be acquired. There is a good chance that you may have to pay an interest rate higher than standard rates or you may have to get a guarantor on board or perhaps, get someone with a good credit standing to co-sign your application, but you certainly do not need to deprive yourself of a home loan.

Incase, unfortunately you do not hold a good score then do not lose heart. You can adopt credit healthy ways and work on improving your score. We have covered on our blog on how you can repair your broken credit.

Rejuvenate the power in your credit score

Like they say, “better late than never”.  Despite a poor score, by bringing discipline in your finances and making a fresh start will help you achieve a better score over a period of time. Avoid being nonchalant about your score, have patience and work on it actively. Once better then go after that loan you always wanted.

There may be chances that you do not have the skill required to negotiate on interest rates or you do not understand how you can bring in discipline in your investments. In this case, you must seek expertise of credit consulting companies who can do this job for you. Find comfort in the company of an expert and follow their advice.

Stay tuned for more credit updates!

Debt And CIBIL Score

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Debt and Credit Score (known as CIBIL score in general) are related closely. Debt affects credit score and your credit score affects your eligibility to get fresh debt. Whether you have to apply for fresh debt or already have some existing debt, it is always important to remember that these are long-term decisions and have far reaching impact on the credit score. Not only do existing loans have a bearing on the CIBIL Score even debt enquiries impact it. Below we explore the various aspects of the co-relation between debt and credit score.

Existing Debt and Credit Score:

Whether its credit card dues or various loans they contribute towards building your credit score. The total debt you have, how you treat the payments all have affect in varying degrees.

  • Payments: If EMI payments and credit card installments are paid on time they have a positive impact on your CIBIL report. If the contrary is true then obviously the impact will not be favorable on the credit score. The older your credit trail the better it is.

  • Combination of Debt: Debt is not something that needs to be avoided; after it is debt that gives you a credit score. How much debt (discussed below) how you treat it (discussed in point A) and the combination determine your credit rating. The right mix of secured loans (home and car) and unsecured loans (personal and credit card) affect the credit rating positively. Too much dependence on your credit card; paying only the minimum amount due frequently and utilization of the credit limit to a high extent all are detrimental for your credit history. This aspect needs careful thought. Having only unsecured loans is not beneficial for the credit score.

  • Debt to Income Ratio Is Also Important: This is the ratio of your total monthly debt to your monthly income. The debt to income ratio should not exceed ideally 40%. Though it does not impact credit score directly but keeping this in mind will help you in managing your debt better.

Debt Enquiries:

Not only debt about enquiry about fresh debt also impacts your credit score. When you apply for any loan the concerned bank will run a credit enquiry. Too many enquiries mean that you have either applied for too many loans or that your application has been turned down too many times. This has a 10% weightage when calculating the credit score. In case you are wondering about how to improve your credit score then make sure that you don’t apply for a loan without giving it the required thought and consideration.

How Credit Score Impacts your Eligibility for Fresh Debt?

Though Credit Score is a reflection of your credit history it has a great impact on your eligibility to apply and get fresh debt. Defaulting on payments of past loans or credit card dues and similar other factors lower the credit score. A low credit score is a red flag and can cause your loan application to be rejected right away. While a good credit score not only ensures that you are able to get a fresh loan (it’s after all the basic requirement) but also ensures some other advantages. A high credit score can get you faster processing of loans, some concessions like a better rates and fee waivers (though these are not guaranteed). A low credit score (not beyond the threshold) can prompt the loan provider to offer loans at a higher rate. All loan providers may not give you a loan (as each has a different threshold score) which can cause delay in processing and can also cause you to lose money in the form of application fees.

So with debt and credit score it’s a two way street. Your existing debt and its trail has impact on the credit score and your credit score in turn impacts your eligibility for fresh debt.

How to do a credit check

The term ‘credit’ is synonymous for ‘loans’. A loan is a borrowed sum of money from a bank or a lending institution to fulfill financial goals and meet monetary needs. A credit card is also a type of loan. Usage of loans and credit cards is recorded on a database by banks and credit bureaus, in the form of credit report. A loan applicant may seek their own credit report, or a bank may do a credit score check for a loan application received to assess loan eligibility. This process is known as credit check and involves checking one’s credit report and credit scores.

Online and offline modes for doing a credit check

A credit check can be done via online and offline modes from any one of the four bureaus operational in India, viz CIBIL, Experian, Equifax or Highmark. These bureaus charge a nominal fee to generate credit reports of a loan user. Online mode is usually preferred, because it is paperless, convenient and faster. For the online mode, one must visit the website of the bureau of one’s choice and fill up the details asked under different tabs. There will be a list of documents given, that will indicate proof of identity and proof of residence – one must collect these and upload them online. Thereafter, move along with the instructions given on the web portal, and follow them; close the application by making an online payment for the charges asked by the bureau. The charges for drawing one’s credit report can range from INR 300 to INR 500, depending on the bureau you approach.

The bureaus also list their helpline numbers and email id for assistance in processing your credit score application. Once you close your online process, the bureau will generate your credit report and send a soft copy of the same via electronic mail only to the email id registered by the applicant. For those who are not savvy on the internet and for those who do not have an email id, the bureau will send a hard copy of the credit report to the applicant’s registered residence address.

Freescoreindia.com gives free credit score. The process here is more or less the same, as for a paid report.