A Helpful Guide to Understanding Your Credit Report_Banner_WC

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A Helpful Guide to Understanding Your Credit Report_WC

5 min 26 Jan 2024
what is credit report
Highlights:
  • Understanding the Credit Report
  • Know the Credit Score Range and What it Implies
  • Know How to Read a Credit Report

Your credit report or CIBIL report reflects your monetary health, providing a deeper insight into your overall finances. It forms an integral part of your credit score and helps lending institutions make financial decisions regarding extending loans and their terms. Once you understand what constitutes a credit report, reading its contents becomes much simpler.

What is a Credit Report?

A credit report is a detailed record of your credit history about loans and credit cards that you own and how responsibly you pay the respective EMIs and bills. Individuals can access their credit reports from any of the four credit bureaus in India: TransUnion CIBIL, CRIF High Mark, Equifax, and Experian. Each credit agency compiles credit information from various lending institutions in the form of a credit report. Thereafter, they assign a three-digit numeral, commonly known as a credit score. A credit score assigned by TransUnion CIBIL is known as a CIBIL score.

Why is Credit Report Important?

The credit report is the only source of information that can be used to calculate your CIBIL or credit score – a three-digit numerical representation of your creditworthiness. Thus, it is one of the factors accessed before sanctioning loans or approving credit cards.

Also Read: What is a CIBIL Score?

A high credit score typically indicates a history of timely payments and responsible credit management, whereas a low credit score suggests past issues with credit, such as missed payments or high credit utilisation. The higher the credit score, the greater your chances of being approved for a loan.

Credit Score Range

Here is a quick look at the different ranges of credit scores and what each of them implies while availing credit:

Your CIBIL Score

What it implies 

800 - 900  

An excellent score range that suggests consistent payments without any defaults on EMIs and credit bills

750 - 800  

This is a very good CIBIL score and you are now in a position to negotiate for a better interest rate

625 – 750  

You have a decent credit history with very few irregularities. You may get a loan but at a higher interest rate

300 – 625  

This score indicates high frequencies of defaults and irregularities. You may find it very difficult to get a loan unless you improve your CIBIL score

 

Also Read: 7 Tips to Help You Improve Your CIBIL Score

How to Check a Credit Report?

A credit report comprises various sections with different categories of information. Each credit bureau has its own format, but the general compilation of the sections is as follows:

1. Credit Score

A credit score is a numerical representation of your credit history ranging between 300 and 900. Lenders evaluate it before approving any credit to determine your eligibility and the appropriate terms.

2. Personal and Account Information

This section contains your personal and account information. It mentions details like types of loans, account numbers, ownership details, important dates, loan amounts, and month-by-month data of your loan accounts for the last three years. It also references your credit balance, available limit, account type, account status, and payment history.

3. DPD Information

DPD or ‘Days Past Dues’ is a record of your credit payment timelines. Even a delay of one day is reflected here either as a remark or a number. For example, if there is a delay of four days, it will be marked numerically. If you default by 0 days, it may be indicated with a numeral or a comment. ‘XXX’ means unreported information. A DPD other than ‘000’ or ‘XXX’ implies that one has not paid their dues regularly.

4. Enquiry Information

Enquiry information encompasses both hard and soft enquiries. A soft enquiry is the one made by you, businesses offering you goods or services and your existing creditor. It does not affect your credit score, unlike a hard enquiry, which is usually initiated by prospective lenders after they receive credit applications. A single hard enquiry may be harmless, but too many credit requests can reduce your score.

5. Credit Report Remarks

The remarks section shows the current state of your accounts. Given below are some lender’s comments that one may commonly find in a credit report:

  • Settled

    Partly paying the dues to settle a loan or credit card may attract a ‘settled’ remark. This has negative connotations for your credit score and future credit aspirations.

  • Written Off

    The inability to pay off the outstanding loan/credit card amount for more than 180 days is reported as a ‘written off’ note and may hurt your credit score.

  • Post Write-Off Settled

    A ‘Post Write-Off Settled’ comment denotes a debt settlement after your credit has been written off. This can damage your credit health, denying you any credit in the future.

  • Wilful Default

    A wilful default happens when borrowers do not repay the loan despite having the means to do so. Those who utilise loan funds for unfair purposes other than the reason for which they were originally availed are also brought under the purview of wilful default. Such borrowers are seriously dealt with, sometimes necessitating legal action.

  • Closed

    When you pay off your loan in full, lenders report the account as ‘Closed’. They also issue a ‘No Dues Certificate’ or closure letter stating the loan cleared.

How to Build a Good Credit Report?

Building a good credit report involves several key practices, such as consistently paying all bills on time, keeping credit utilisation below 30%, and maintaining older credit accounts to show a long history of credit use. It is also important to avoid frequent credit applications, as too many inquiries can signal financial instability. Regularly monitoring your credit report helps fix errors early. Having a diverse mix of credit types, such as credit cards, instalment loans, and mortgages, can positively impact your score. Additionally, managing debts responsibly contributes to a healthier credit profile.

Also Read: How to Check CIBIL Score?

Conclusion

It is imperative to read your credit report for easier monitoring of the records and to maintain a healthy CIBIL score or even improve it if necessary. Tracking your report periodically enables you to check its accuracy. In case of any discrepancies or mistakes, report them to the credit bureau immediately. They will consult the financial institution in question before effecting the necessary changes. Your credit records let you make more informed decisions regarding your spending habits and credit behaviour as a diligent borrower.

FAQ-complete-guide-to-understanding-your-credit-report

Frequently Asked Questions

It is advisable to review your credit report periodically to ensure all information is accurate and up-to-date. Regular monitoring helps in identifying any discrepancies or unauthorised activities early on.

If you discover inaccuracies in your credit report, you should initiate a dispute with the respective credit bureau to address issues such as incorrect personal details, account information, or ownership. Upon receiving your dispute, the bureau will coordinate with the respective lender to verify and, if necessary, correct the information.

Negative information, such as late payments or defaults, can remain on your credit report for a significant period, potentially up to seven years. However, the exact duration may depend on the nature and severity of the information reported.

While simply reviewing your credit report does not directly improve your credit score, it allows you to identify and rectify errors that may be adversely affecting your score. By ensuring all information is accurate and addressing any discrepancies promptly, you can positively influence your credit health. Additionally, regular monitoring helps you stay informed about your credit activities and manage them responsibly.

A credit report is a comprehensive record of your credit history, detailing your credit accounts, repayment history, and enquiries made by lenders. In contrast, a credit score is a three-digit numerical representation of your creditworthiness, derived from the information in your credit report.

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DISCLAIMER:

While care is taken to update the information, products, and services included in or available on our website and related platforms/websites, there may be inadvertent errors or delays in updating the information. The material contained in this website and on associated web pages, is for reference and general information purposes, and the details mentioned in the respective product/service document shall prevail in case of any inconsistency. Users should seek professional advice before acting on the basis of the information contained herein. Please take an informed decision with respect to any product or service after going through the relevant product/service document and applicable terms and conditions. Neither Bajaj Housing Finance Limited nor any of its agents/associates/affiliates shall be liable for any act or omission of the Users relying on the information contained on this website and on associated web pages. In case any inconsistencies are observed, please click on contact information.

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