UNDERSTANDING YOUR CREDIT REPORT

03 July, 2020

If you have ever applied for a credit card or student loan or personal loan, you are bound to have a credit report.

So what is a credit report? A credit report is a detailed summary of one’s bill paying history and current status of one’s credit accounts, reported to credit bureaus or credit Information Company by banks and other credit lending institutions, who at some or the other point, have extended credit. A credit report lists your personal information, your credit accounts like loans, mortgages and bankruptcies and your payment and default history. Credit reports provides a snapshot of your ability to manage your finances to the lenders. Therefore, in layman’s language, a credit report is nothing but a detailed summary on your credit history.

Who creates your credit report? Credit bureaus are for-profit companies that gather information from creditors and public records and consolidate it into a credit report. In India there are four credit information companies that are authorized by the Reserve Bank of India. They are:

1.Equifax

2.CIBIL

3.Experian

4.CRIF High Mark

Based on the received data, the credit bureaus draft the credit report and formulate the credit score. Each of these credit bureaus generates its own reports using various scoring models. Credit reports enable lenders to determine the creditworthiness of the borrowers.

What are the components of credit report? A credit report comprises of the following sections:

1.Credit score: It is a three-digit numeric summary of one’s credit history, which ranges between 300 and 900 and is calculated using details from the account and the enquiry section of the Credit Report. Credit score is considered during credit approval.

2.Personal and account information: It comprises of one’s personal details like- type of loans, account numbers, loan amount etc

3.DPD information: “DPD” or “Days Past Dues” is a record of your payment timelines of various credit accounts.

4.Enquiry information: Credit enquiries are made when you or another party seeks access to your credit report.

5.Remarks in a credit report: Remarks identify the current state of accounts in your credit reports.

What is CIBIL score? The credit score calculated by CIBIL is called CIBIL score. It ranges from 300-900 and the closer your score is to 900 the better your rating is.

Knowing how to read and understand the information in your credit report can help you learn how you can improve your credit score and in turn increase your creditworthiness to the potential lenders.