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Read and Analyze Your Credit Report_WC
Credit information bureaus are institutions tasked with the responsibility of collecting data about individuals’ credit history and their attitudes towards credit. Based on the data collected, these financial institutions assign credit scores to borrowers. The credit score is a numerical representation of one’s creditworthiness as a borrower. Ranging between 300 and 900, the credit score tells a lender how likely it is that a borrower will default on loan repayment. A credit report is a document that details a borrower’s credit history as well as other information about them that helps lenders assess a borrower’s repayment capacity. It is, thus, that all lenders check borrowers’ credit scores and read credit reports before deciding on loan applications.
Borrowers must also learn to read credit information reports if they want to develop an understanding of the factors that affect their credit scores, take corrective measures to improve CIBIL score and in general, enhance their eligibility for a loan.
Here’s How to Read Credit Information Reports
As a borrower, you must learn how to interpret your credit report. In this section of the article, we will first discuss the common terms used in a credit report and then, we will look at the different parts of a CIBIL report.
In India, credit users often get confused between a credit score and a CIBIL score. So, let us clarify the difference between the two. In India, four credit information bureaus are authorized to assess a borrower’s creditworthiness. These are Equifax, Experian, CRIF HighMark and TransUnion CIBIL. Of these four, TransUnion CIBIL is the most well-recognized and is used by most lenders in India. The credit rating given by TransUnion is known as the CIBIL Score.
A control number is a nine-digit number that helps you identify your credit report and credit profile. If you want to perform any communication with TransUnion CIBIL regarding your credit profile, this is the number you will have to quote during your conversations with them.
Days Past Due
This refers to the number of days that have passed since your payment due date. Borrowers should try and keep this number at zero.
In the case of a loan dispute, lenders and borrowers generally agree on an out-of-court mutual settlement. When this happens, the borrower is required to pay a certain amount to the lender to settle the dispute. This amount is known as the settlement amount. Again, ideally, this amount always also be zero.
When the lender and borrower agree to close a loan account by paying the settlement amount, the remaining amount left that the borrower should have paid but did not is called the written-off amount.
Under this section, one will find information about the amount that the borrower should have paid but did not.
This refers to the maximum amount that has ever been billed by a credit user on their credit card.
Payments that have been overdue for more than 3 months are classified as non-performing assets.
Now that we are familiar with the common terms used in a CIBIL report, let us look at the various sections of a credit report.
Here’s What These Various Sections of a CIBIL Report Mean
Let us now look at the various sections that a borrower sees in their credit report and what each section denotes.
A credit score is a three-digit number ranging between 300 and 900 that indicates a borrower’s creditworthiness and repayment capacity. The higher your credit score or the closer it is to 900, the better an individual’s chances of availing of a loan. If a borrower’s CIBIL score is zero, it means their credit history is relatively new, and therefore, there isn’t much information available to calculate their credit score. If a borrower’s CIBIL score is -1, it means they have no credit history at all.
Under this section, borrowers can find basic information, such as their name, gender, date of birth, etc. as well as identity-related information, such as their PAN, Aadhar or Passport details, voter ID card details, etc.
Under this category, you will find information that will help lenders contact you. Under this category, you will find information, such as home address – both the residential address and office address, email address and phone number.
This section contains information regarding a borrower’s employment and income history.
This is the most important section you must learn to understand if you want to interpret your credit report. Under this section does one find all information related to all the active loans and credit cards that one has. The account information will give you and your lender information about all the lenders you have worked with in the past, the types of loans you have availed of, details of these loan accounts, your current outstanding debt and month-on-month payment details for the last six months. Under this section, you also find information about outstanding balances and days past due. Needless to say, your credit score is calculated based on the information you see under this section.
This is something very important. If you see a red box above the Account Details section, it means that you and your account are part of an open dispute. If you want this red box to go, your only option is to settle the dispute.
Under this section, one finds information about all the hard enquiries made by lenders in response to the borrower’s credit applications. Too many hard enquires negatively impact a borrower’s credit rating. Therefore, if you see too many entries under this section, know that it is not a good thing.
Your credit score is one of the first things that lenders check about you after receiving your credit application. Therefore, you must make sure your credit score is at least 750 or above. It is important to learn to read credit reports. Only when one can read credit information reports can they take corrective measures to improve their credit score. We hope the information provided in this article will prove helpful in this regard.
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