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What Is Credit Score?

IndianMoney.com Research Team | Updated On Friday, December 14,2018, 12:52 PM

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What Is Credit Score?

 

 

Credit score is a three-digit numeric summary of credit history. You get the credit score based on credit history found in the Credit Information Report (CIR). The Credit Information Report gives loan repayment history (all loans and credit cards) across credit institutions over a period of time. The CIR doesn’t have details on savings, investments, FDs and so on.

Types of credit bureaus? Credit Information Companies also called credit bureaus are specialized financial institutions that collect and maintain loan and credit card related information. On the basis of track record of repayments and some other factors, Credit Information Companies create a Credit Information Report and assign a credit score. Lenders like banks and financial institutions check credit report and credit score before sanctioning loans. With credit report, banks can make informed decisions on whether to accept/decline loan applications.

Popular Credit Bureaus are CIBIL TransUnion, Experian, Equifax and Highmark. Want to know more on Home Loans? We at IndianMoney.com will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice/education to ensure that you are not misguided while buying any kind of financial products.

What Is Credit Score?

 A credit score gives banks an idea on how you manage credit. (This is both loans and credit cards). Banks want to know on past repayments before sanctioning new loans. A CIBIL score is a 3 digit number between 300-900. A CIBIL score above 700 is considered good.

CIBIL score is assigned by Credit Information Bureau (India) Limited or CIBIL which was founded in the year 2000. CIBIL score is a 3 digit summary of credit history.

Experian is a credit information Company undertaken and operated by GUS Holdings BV (Netherlands), Union Bank of India (UBI), Axis Bank Limited, Indian Bank, Federal Bank Limited, Punjab National Bank (PNB), Sundaram Finance Limited, Magna Fincorp Limited, and VIC Enterprises Private Limited. Experian was established in 2006, and the Credit Information Company made it to the ‘World’s Most Innovative Companies’ in the Forbes Magazine 2014 Edition. Experian offers comprehensive and detailed credit report with scores ranging from 330 to 830.

1. What is Credit Information Report?

Credit score is calculated based on Credit Information Report or CIR. Lets take a look at breaking down Credit score.  The Credit Information Report contains:

  • Personal Information: It has name, date of birth, gender, identification like PAN, Passport Number, Voter ID and so on.
  • Contact Information: This contains addresses and phone/mobile numbers.
  • Employment Information: Monthly or Annual Income details reported by banks or Financial Institutions.
  • Accounts Information: This section contains name of the lender like SBI, HDFC Bank, Kotak Mahindra Bank, IndusInd Bank, Axis Bank, Yes Bank and so on. It also has type of credit facilities like home loan, car loan, personal loan, overdraft, credit cards and so on. It has account numbers, ownership details, date opened, date of last payment, loan amount, current balance and a month on month record of payments.
  • Enquiry Information: Whenever you apply for a loan or credit card the bank checks/accesses CIR. The system makes a note of this in credit history called “Enquiries”. If you apply for a loan and the lender whom you’ve applied checks credit report for decision making process, this is hard enquiry. This can affect credit score. If you apply for free credit report and credit score, this is a soft enquiry and doesn’t affect credit score.

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2Credit Score Factors:  

  • Credit Repayment History: Timely repayments pay a very important role in Credit score. Default in loans and credit cards affects Credit score. Pay credit card bills and loan EMIs on time to get good credit score.
  • Credit Utilization Limit: Credit limit is the maximum amount you can spend with credit card. Credit utilization limit is calculated by dividing total outstanding amounts with credit limit. A low credit utilization limit boosts credit score.
  • Multiple loan applications: Whenever you apply for loan or credit card, banks run a check on credit information report called hard enquiry. If you apply for multiple loans simultaneously, banks believe you are credit hungry affecting credit score.
  • Loan servicing: Apply for long-term loans and make timely repayments.
  • Large Number of unsecured loans: If you have a large number of unsecured loans like personal loans, credit card and so on, it can affect credit score. Unsecured loans (Loans without collateral) charge high interest affecting repayments. More number of secured loans like home loan, car loan, LAP and LAS make credit score go up.
  • Credit limit increase: Applying for credit limit raise can affect credit score. The bank applies for credit report which is a hard enquiry affecting credit score.
  • Loan guarantor: If you stand loan guarantor and that person defaults on loans/delays repayments, this affects Credit score.

SEE ALSO:Everything You Need to Know About Endowment Policy

3. Steps to get free credit report:

STEP 1: You have to create username and password. You then enter name, email ID and password.

STEP 2: Enter personal details like date of birth DOB, address, identity proof like PAN Card and Aadhaar.

STEP 3: You get an OTP to verify details. This is to make sure it’s really you.

STEP 4: Get Credit Score and Credit Report.

4. How to get free Credit Report from Credit Information Companies?

STEP 1: Create account by entering Username, Password, First Name, Middle Name, Last Name, Email ID and Telephone Number.

STEP 2: You have to fill date of birth, gender, Address, Identity Proof like PAN or Aadhaar.   

STEP 3: You get a Pop-up window saying CIBIL report vs free CIBIL report. You click on No, Thanks option to continue.

STEP 4: You are led to the next page where you give alternate email ID.

STEP 5: You get SMS to mobile with details on Credit Score. You get email with login credentials to access Free Credit Score.

STEP 6: You then visit Welcome to myCIBIL and get free credit score and credit report.

Get free credit report once a year. Credit score + Credit Report costs Rs 550. Only Credit Report costs Rs 164 including taxes.

SEE ALSO:IndianMoney Review On Pros and Cons Of Buying Insurance Online

5. How to check Free Experian Credit Report?

  • Login to Experian website and click on the ‘Get Your Free Credit Report’ Tab.
  • Give personal details and you receive a “voucher code” only after selecting “Request Free Voucher”.
  • With this voucher you get free credit report within 2 days.

How to apply for Experian Credit Information Report?

  • Download Experian Credit Information Report.
  • Fill in the requisite details and sign it.
  • Give self attested Address and Identity Proof Photocopies.
  • Pay Rs 138 via DD or Internet/Mobile Banking.
  • Send completed signed application with self attested Address and Identity Proof and DD/NEFT Payment receipt to:

Experian Credit Information Company of India Pvt Ltd

P. O. Box. 9096,

Goregaon (East),

Mumbai - 400063.

6. How to improve credit score in India?

  • Pay loan EMIs on time.
  • Keep an eye on credit utilization ratio.
  • Increase credit limit but maintain low credit utilization ratio.
  • Get secured loans and secured cards.
  • Keep oldest credit card account.
  • Check credit report and correct mistakes .
  • Don’t apply for loans and credit cards if loan application is rejected.
  • Never settle loans and credit cards.
  • Keep borrowing to the minimum.
  • Never stand loan guarantor
  • Get mixed credit (Secured + Unsecured Loans)
  • Make sure joint applicant has good credit score. 

SEE ALSO:How to Block And Unblock your Credit Card?

7. Steps To Check Free Credit Score on IndianMoney

IndianMoney.com is India’s leading financial education company which was formed to curb the misleading sales practices rampant in the financial services sector. IndianMoney has tied-up with Experian to give FREE Credit Score. Get your FREE Credit Score Report on IndianMoney.

To get FREE Credit Score enter:

  • First Name
  • Last Name
  • Email Address
  • Gender
  • Date of Birth
  • Address
  • PIN Code
  • City
  • PAN Card No
  • Mobile Number

After you fill Mobile Number an OTP will be sent to mobile phone. You fill the OTP Number and then tick the box:

  • You hereby consent to INDIANMONEY being appointed as your authorized representative to receive Credit Information from Experian for the purpose of lead generation and financial advisory.

You then click “Get my Credit Report”.

You will see Credit Score. A credit score of 700 and above is good while some lenders look at 750+ scores. You also get to see:

  • Credit Account Summary
  • Credit Balance Amount Summary
  • Credit Enquiry Summary
  • Non-Credit Enquiry Summary

You will also see Summary: Credit Account Information.

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IndianMoney.com Research Team

The research team at IndianMoney.com comprises of certified and experienced professionals who share the company's vision to make every Indian financially literate by equipping every Indian with right and unbiased advice. IndianMoney.com research team provides newsletters, articles, videos and FAQs on various financial products and concepts only to help you make wise financial decisions.

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