Achieving a good credit score is an iceberg. There is what people see on the surface: lower interest rates, faster loan approvals, enhanced credit limit. Then there is what people don’t see hiding below the surface: consistency in payments, maintaining a low credit utilization ratio, limiting loan applications, tracking credit report regularly. The key to the ‘Credit Score Illusion’ is creating balance in your financial life. Take a look at our image and note down the things that resonate with you!
Three digits that have the power to shape your world: your credit score. The higher the score the better are your chances of dreams becoming true. Not only you will have easy access to loans but will also be offered lower interest rate, which means taking the loan will cost you less overall and you could save a substantial amount over the course of a lifetime.
And when something impacts your life that much, don’t you think you should be familiar with it? The sad story is that tens of millions of Indians are taking a blind approach to their money. Everyone wants their finances to be in good shape, but only a few tend to work towards maintaining a good credit history.
Here we list down 5 important and basic questions about credit score to get you started:
1. What is on a credit report?
The short answer to that question is: A lot! A typical credit report will include personal identifying information: a list of credit accounts (including credit limit), type of account (credit card, home loan, auto loan, etc.), and your payment history on those accounts. Each of the four major credit reporting bureaus compiles data from sources such as banks, NBFCs etc that extend you credit. Based on all this data, companies may calculate a credit score to reflect your creditworthiness. Since each of the credit reporting bureaus provides a score, you may have at least four scores. Bits and pieces of your credit history may vary slightly among the four companies because not all businesses supply information to all three agencies. However, the broad picture of your credit history should be relatively consistent.
2. What Types of Information Can Impact Your Credit Scores?
The two most crucial factors that affect your credit score is your repayment of the loan and how timely you pay your EMIs and card dues. If you are a month late in paying your dues, then your credit score might drop by 80 points. Next up is, credit inquiries. They can affect your credit score in a major way. There are two types of credit inquiries, soft and hard. Soft Inquiries are harmless to your credit score but the hard inquiries that are often done by lenders before lending money to you can bring a change in your credit score even if you do not get the loan in the end.
Opening new credit accounts can or taking new loans also affect but it can be fixed with regular and timely repayments. Lenders evaluate the credibility of the borrower at their own discretion. They may use whichever scores they’d like and measure those scores on a scale that is unique to them. It’s also possible that they may not even consider credit scores at all but just the contents of the credit report.
3. Your Score Is Less Than 700. Now What?
Check your credit score yearly, at least to avoid surprises! With CRIF you are entitled to one free credit report every year. And no, your credit won’t take a blow if you do this – it’s considered a “soft” inquiry. If your credit score is lower than 700 then you should dig deep in your credit report and find out the reasons for bad credit score. Look at your credit card balances and credit utilization ratio. The closer you are to hitting your maximum limit, the more it may lower your score, so pay down those balances if you can. Check out for errors/information listed in the credit report not undertaken by you, in that case, you should immediately report to the credit bureau or the banks to update your information.
Abruptly closing your credit cards with a long credit history can affect your credit score in a negative way. How long you’ve been borrowing affects your score. The longer the better.
4. How long does a bad credit rating last?
Debts have a finite duration, and so does negative information that appears on your credit report. All negative information on the credit information after 7 years often start to value less for the credit score. Make sure all your payments and your credit activities are timely and regular to show stability in your credit behaviour and eventually pushing your credit score towards the good side.
5. Who Can See Your Credit Report?
Your credit report information is not available to the public and can be accessed only you’re your permission. When you apply for a loan and credit card then your permission is required as the lenders and banks need to investigate the information to determine your creditworthiness and your potential and ability to pay back the borrowed amount.
Now that we have explained the basics of Credit Score, wait no longer, follow these steps and start building a good credit history now!
A credit report is a testimonial of how well (or unwell) you manage your money. These reports contain a history of balances, payments, accounts, inquiries and other pieces of personal information that are referred by lenders to decide whether to lend you money. Credit scores are calculated from the data contained in your credit report. In India, scores range between 300 and 900. The higher the number, the better the score.
There are four credit bureaus in India from where you can download your credit report and find out your credit score. By law, you are entitled to a free credit report from all the four credit information companies at least once a year. Alternatively, you can also check your credit score either free of cost from online websites which have tied up with one or more of these credit bureaus.
Let’s find out how you can get your CRIF score in the following 3 easy steps from CRIF High Mark’s website:
1. Fill in your Details, Identification Proofs, and Address: You will be asked to provide your email ID first; Post which you will be presented with a form requiring the rest of the details such as Full Name, Mobile Number, Date of Birth, Residence Address & Gender. You will also have to submit your identification details such as PAN number, Voter’s ID, Passport Number, Driving License, or any other ID.
2. Review your Report type:
Here you are presented with two options of downloading credit report; you can either BUY an instant credit report or you can opt for a FREE credit report. An instant credit report can be ready to download within 5 minutes but will cost you around Rs. 400 where as a FREE credit report can take up to 3 working days to get ready for your viewing.
3. Authenticate your inquiry: Once you fill in all the details and select your report type, you will be asked to answer a multiple-choice question to confirm your identity. You will get a set of three questions based on your past loans or credit cards. Upon a successful answer to one of these three questions, you will be presented with your report on your registered email ID.
How often should you check your credit score
You can check your credit score as often as you want to. The common misconception that checking frequently negatively impacts your score is just a myth. A Credit score can affect aspects of your financial life such as the ability to buy a home or car or even get a credit card. Here are a few more reasons you should know your credit score:
• Knowing your financial value: Credit score is an indicator of your financial health. By knowing your credit score, you know financial standing in the market. If you have a low score, you can take corrective measures to improve it. If you have a high score, you can take pride, rejoice and try to maintain it.
• Get better interest rates: A good credit score not just helps you secure a loan, but also reduces your interest rates. A bad score may render you unqualified for a loan or in the least give you a tough time.
• Get rewarded: If you have a credit score, you might well expect occasional rewards in the form of discounts, credit increment and other benefits owing to your clean conduct.
While being aware of your credit score and routinely checking one will keep you well informed and ahead of your counterparts, make sure you don’t make overdo it to the point that it starts causing anxiety!
If you are planning immigration to the US, credit score is probably one of the last things you would worry about. However, in the US, many of the essential expenses such as renting an apartment, buying a car, signing up for a cellphone plan or applying for a credit card, requires you to have a personal credit score.
Worrying whether it’s possible or not? The great news is that it is possible to establish credit in the U.S. It may take work but with right credit decisions, you can definitely sail your boat. This guide can help you get started with the steps you need take to build your credit in the United States:
Apply for a secured credit card: The international banks are not likely to provide you any credit card directly, considering they cannot have a credit check on you without a credit history. The only option you have is to apply for a secured credit card (one that is backed up by funds) with a credit union or a local financial institute. If you manage to get yourself a credit card like a Macy’s or an American Express card, it can be used to purchase at the Macy’s retail stores or online, wherever the cards are accepted. Once in possession, try to make minor bills such as $30 to $50 with the card and repay back the full amount immediately. In this way, you will start creating a good credit history.
Subscribe for auto payments: Subscribing yourself for auto deductions ensures that your bill payments are done in a timely manner. The credit information companies in the US consider mobile and utility bill payments while building your credit report.
Use your spouse’s good history: If your spouse happens to be a US citizen with a good credit history, rejoice, for they have won half the game for you. You can apply for a joint account with them or become an authorized user on your spouse’s credit card. You can then buy a car or rent a house together!
Talk to the lender in person: It is always better to talk to the lender in person as then you can better explain your situation. This also helps establish your legitimacy with the lender and they can better analyze you.
Report your rents: Make sure you are paying your house rents electronically as you can now report the rent to the credit bureau. This is one good way to build your history.
Leverage your home bank relations: If you were a credit card owner with an international bank in India, you might be able to call the bank and get them to issue you a U.S. credit card based on your past relationship.
Do not share your SSN: The social security number in the US is like the Aadhar number in India. It is a unique number assigned to each individual and is connected with all your dealings. Your Social security number is required while buying something. Let’s say you share the number with someone who requires a telephone connection on that number. In the case that they were to default on paying their bills on time, it would reflect badly on your credit report and will hamper your credit score.
If you follow the above pointers, you will be smartly prepared for your stay in the US. But wait, there’s more! Always keep an eye on all accounts so you can identify and resolve problems quickly. Check your credit score regularly to track your progress. Pull your credit report at least once a year from any of the approved credit bureaus. It’s free and seeing what is being reported about you is illuminating. All the best!
A bank or any other lender evaluates a potential borrower before granting a loan and handing out the money. This evaluation can be called credit risk assessment as the bank is trying to understand the risk of potential default by the borrower on this line of credit. The Five Cs of credit is a widely popular framework which considers five characteristics of the borrower to helps lenders gauge the creditworthiness of the borrowers.The 5 Cs of credit are Character, Collateral, Conditions Capacity, and Capital in no particular order. Let us understand what these 5 Cs stand for.
Sometimes also referred to as the credit history, a character is the first among the C’s (in our list). If you are one of those who thinks “what has good character got to do with a loan?” then oops! Your character is, in fact, one of the most apparent parameters by which lenders gauge your risk and trustworthiness. In financial terms, the character represents a borrower’s reputation for repaying debts. This information appears on the credit report generated by the credit information companies such as CRIF. Apart from credit score, the credit report also contains information about how much an applicant has borrowed in the past and whether they have repaid loans on time. Information from these reports helps lenders assess the borrower’s credit risk.
Beyond your credit, lenders may also take a literal approach to the word “character” and analyze your personal attributes. They may conduct an interview or require references. Be polite, prompt, and prepared when you approach a lender. That might just make the difference to your loan approval.
Every lender must make sure that it is lending money to someone who has the capacity (or simply income or wealth) to repay. It is a measure of the borrower’s ability to repay a loan by comparing income against recurring debts and assessing the borrower’s debt-to-income (DTI) ratio. The DTI is calculated by adding together a borrower’s total monthly debt payments and dividing that by the borrower’s gross monthly income. The lower an borrowers DTI, the better the chance of qualifying for a new loan. Every lender is different, but many lenders prefer an applicant’s DTI to be around 35% or less before approving an application for new financing.
Lenders consider any capital put by the borrower in their investment, in other words, the own contribution or the down payment. A large contribution by the borrower minimizes the chance of default. Borrowers who can place a down payment on a home, for example, typically find it easier to receive a loan. Down payments indicate the borrower’s level of seriousness and whether the borrower’s goals are realistic and in congruence with the paying potential. Down payment amount can also affect the rates and terms of a borrower’s loan. Larger down payments may result in better interest rates and terms.
Collateral is any personal asset that the borrower pledges in order to support the loan. It acts as a lender’s back up in case you abscond or are genuinely unable to repay your loan. After all, it’s a business and none of the two parties would want to be at a loss. In the case of a loan default, the lender will have to liquidate your assets which have been put as security against the loan. The collateral can be your house property, land, equipment, inventory, real estate, accounts receivable, or any other item holding monetary value in the market. Banks measure collateral quantitatively by its value and qualitatively by its ease of liquidation. The simple formula is; Risky collateral = difficult to liquidate = more expensive loan. Most obvious examples of collateral include houses, cars, stocks, bonds, and cash, basically, all things that are readily convertible into cash to repay the loan.
The conditions of the loan, such as its interest rate and amount of principal, influence the lender’s decision to finance the borrower. Conditions can refer to how a borrower plans to use the money. For instance, if a borrower applies for a car loan or a house loan the lender is more likely to approve the loan because the intent is specific and clear. Additionally, lenders may also consider factors such as the state of the economy, the trends in your business’s industry current environmental conditions, and even geographic or political events. The point is that, for conditions, lenders look for factors beyond your business alone that might affect whether you can make good on your debt.
Understanding what your lenders are looking for will help you prepare a better loan application. And, hopefully, this carefully-crafted application will help secure a better loan for your personal or business use. CRIF is a consumer credit bureau providing free credit report & credit score for both persons and businesses.
Credit reports provides information about your credit activity, payment history and the status of your credit accounts based on reporting from creditors and other sources. These reports are crucial because credit card issuers and lenders check them to help determine things like whether you’re a credit risk, what interest rate they’ll offer you, and the amount of your credit limit. With so much information, where do you even start when it comes to reviewing your credit reports? Let’s take a look.
If you need to maintain your credit score, it won’t happen overnight.Credit scores take into account years of past behavior you can find on your credit report, and not just your present actions. But there are some steps you can take now to start on the path to better credit, read our infographic to know more..
When you apply for a loan of any kind, irrespective of your background or your ability to pay a lump-sum in your down payment, one important tool that helps the bank trust your ability and your intent to repay is a good credit score. Since the time credit bureaus have come into the picture, a credit report has become a financial bible for the banks.
A credit score is an aggregation of all your loans and credit cards. It reflects your creditworthiness and credit health. A score between 750 and 900 is the equivalent of an A/A+ on your school report card. It implies you’ve been very responsible with your credit, paying your EMIs and dues on time and in full each month. Even if you had a low score at one point, you’ve worked hard over time to reclaim a top spot on the credit score charts. In short, you’re very mindful and responsible when it comes to credit.
Your score also reveals that you’re a relatively safe bet when it comes to borrowing money from a lender or availing credit card facilities. According to credit bureaus, the lowest interest rates tend to go to borrowers with credit scores in the 750-900 range, which means your high score will also help you save money down the road. Besides these advantages, a 750 above score is also loved by banks. Below are the some of the reasons:
1. Judging your reliability becomes easier: The credit bureaus like CRIF are RBI regulated and for scoring an individual they employ sophisticated statistical analysis of your repayment performance on loans and credit cards listed in the credit report. A credit score takes into account many parameters, and helps bank predict future riskiness of a customer. The credit score thus becomes one of the major criteria for the bank.
2. Saves the bank a lot of time: The credit score is a sum of your loan repayment behavior so the bank saves a lot of time in analyzing how your credit behavior is or your ability to repay. The loan sanctioning process is simplified and is a lot faster. As a customer, you get your loan decisions fairly quickly.
3. Accuracy is on point: Initially, the traditional ways were adopted to verify an individual’s credibility which differed as the process depended on varied sources thus making the results volatile in nature. Since the time credit bureaus like CRIF have come into the financial world, the decisions have become more objective, data driven and also standardized. Therefore, the accuracy of the decisions have improved and also more dependable.
A good credit score is the magic wand that does the trick on banks when you apply for your loan to fulfil the most awaited dreams. The banks come across thousands of application for loans and the credit score helps them accept or reject applications in a more organized way and also quite quickly. A bad credit score can make you a risky bet while a strong credit score is encouraging to banks, ensuring you get the best deals out there, which saves you time, money and worry.
Check out our infographic to know what affects your credit score and how your actions could improve or hurt your creditworthiness. While various credit scoring models may weigh each factor differently, we’ve listed out the most important ones for you.
We know how important a credit score is in our everyday lives especially in our ability to take loans. Did you know it is equally important to check your credit score at regular intervals? There are a number of reasons to do so – some of them are to keep a track on your credit standing and take necessary steps to improve or maintain the credit reports and credit score. While we all know that checking your credit score is important, one thing that bothers a lot of consumers is if checking their own credit report will hurt their credit scores. We are breaking down the entire process to give you a crystal-clear view.
What does ‘credit report check’ or credit score check mean?
A credit report check, also known as an inquiry for credit score is either done by you or by the potential lenders of loan or credit cards such as banks, NBFCs and other financial institutions. A bank checks your credit score usually when you apply for a loan or a credit card to know the creditworthiness of the applicant. Further, a bank can also check your credit history and credit score while you are a loan or card customer of the bank to monitor its portfolio of customers.
Credit Report Check shows or not Hard Inquiry Vs Soft Inquiry
A credit report check or a credit inquiry can be classified into a hard inquiry or soft inquiry. Hard inquiries occur when you apply or request for a new credit card or a new loan or a line of credit like increasing the credit limit on a card. Such inquiries leave a footprint on your credit history and show up on your credit reports. Too many hard inquiries over a short duration have a negative impact on your credit score, especially if the credit keeps getting denied.
Hence, it is advisable to limit your applications for credit card or loan. Make sure you’re only applying for credit only when it really is necessary. Select a credit card and a bank after doing research rather than blindly applying for credit with many banks. Want to know about the ways that can positively impact your Credit Score? Read our blog, “4 ways to Build a Great Credit Score.”
On the other hand, soft inquiries occur when an individual checks his own credit report and credit score. These are the type of inquiries that do not show on the reports, no matter how many times you check your credit report. Even if these appear on your credit report, these will never affect your credit score despite you checking five times in a single day.
When you are pre-approved for a special credit card offer or personal loan, it is very likely that the Bank would have carried out a soft inquiry on its existing customer base, such as you. Banks periodically review its existing pool of customers for assessing risk of its loan portfolios and finding out good customers whom to make pre-approved loan offers. Since these are soft inquiries, you do not need to worry on any negative effect of these checks on your credit score.
If you want to still keep a record of the inquiries just to stay more informed about them, CRIF can help you with the annual credit report with details of hard inquiries in your credit report.
Keep a check, always.
Consider your credit scores as a pie that represents your financial being. Your pie is divided into slices, each of which constitutes of different factors. One large slice is your timely payments, another is your length of credit history and yet another is total credit used. And then there is a tiny slice which represents your hard inquiries. It is essential to control your hunger and not to bite this slice. This diet won’t help you to lose weight but can definitely help you gain some points on credit score. It is essential to keep your credit on a check as it gives you an accurate position of your credit standing.
To ease out the hassle of keeping a check on your credit score, you can contact CRIF. It is an RBI-approved credit information bureau that gives trusted and accurate results of the credit score.