What is Credit Score?
Credit score is a three-digit summary of credit worthiness. Credit Score depicts your ability to manage debt. It is very important to have a good Credit Score to avail credit of any form (home loan, personal loan, auto loan and so on), from banks and financial institutions. All the banks and financial institutions look at your credit score, before sanctioning a loan.
RBI has authorized companies registered under ‘The Credit Information Companies (Regulation) Act’, 2005, to generate Credit Ratings, Credit Reports and Credit Scores based on the information shared by banks and financial institutions. Credit Information Bureau India Ltd (CIBIL) is India's popular credit information bureau. Experian, CRIF High Mark and Equifax are the other credit information bureaus in India.
Eligibility and Documents for Free Credit Score:
Any person can check credit score online, either free or by paying a minimal fee. To check credit score online, enter the following details:
Online method: Enter the details given below to obtain the free credit score online:
- Name
- Date of birth
- Address
- PAN card details
- Valid mobile number
- Identity authentication
How to get free credit score?
Credit score is a crucial factor which helps banks determine if loans must be sanctioned. A credit score determines the credit worthiness and the debt management capacity. Credit Score ranges from 300 to 900 points.
The credit score assigned is calculated based on the information the bank forwards to the credit information agencies like CIBIL. The bank shares information on the repayment history of loans and credit cards with credit information Companies. If you have good repayment history, then it reflects positively on the credit score. If you have defaulted on payments or have failed to pay the credit card dues, it will severely impact credit score.
Some online websites and aggregators allow you to check credit score for free. You can check credit score either by visiting the Credit Information Company’s website or through the online aggregators dedicated to offering the free credit score. You must enter personal details to get free credit report and credit score.
Who Computes Credit Score?
CIBIL, Equifax, Experian, CRIF High Mark are the Credit Information Companies in India. CIBIL however is the most popular, as it was the first credit information company to start operations in India. The process followed to compute credit score may differ, but the credit score is determined using the same factors. This is because banks forward the same information to all the 4 credit companies. Banks give equal importance to credit scores from all the credit rating agencies in India.
CIBIL credit score:The CIBIL credit score is assigned using the credit repayment history across various loan types and credit institutions over a period of time. The CIBIL score ranges from 300-900 points and a CIBIL score above 750 points are generally considered good.
Equifax credit score:An Equifax credit score is a 3-digit number ranging from 300 to 900 points that gives the lenders an idea on the credit health of the borrower. A high Equifax score indicates good credit health. A credit score is important as it impacts borrowing capacity and the ability to avail fresh credit from banks.
Experian credit score:Just like other credit rating agencies, Experian too computes credit scores. The Experian credit score is widely referred to while making lending decisions. Experian uses a different model to determine your credit score. The Experian score ranges from 300 to 850 points where a score above 700 is generally considered good.
CRIF Highmark credit score:This score ranges from 300 to 900. CRIF which is an RBI-licensed credit bureau in India has a major presence in Europe and the Asia-Pacific region.
How to get a free credit report from IndianMoney.com?
IndianMoney.com which is India’s leading financial education company was established to educate people on misleading sales practices prevalent in the financial services space and offer free financial advice.
Indianmoney.com helps check your credit score and credit report for free. It has a tie-up with the leading credit information company CRIF Highmark, allowing you generate a free credit score. To get your credit score follow these steps:
- Visit Indianmoney.com
- On the home page click on the ‘free credit score’
- A new page opens. You must enter your personal details.
- Enter your first name, last name, e-mail, and gender, date of birth, address, PIN Code, City, PAN Card Number and a valid mobile number.
- Click on “get my credit report” button
- Your credit score and account summary gets displayed.
Importance of credit reports:
The credits reports are used by banks and financial institutions before lending money. The credit report helps the lender understand the creditworthiness and the repayment history of the borrower. It gives insights on the repayment pattern of the borrowers. If the borrower has missed payments or has defaulted on loans then it will be mentioned in the credit report. Banks and financial institutions generally check the credit report of a person for the following reasons:
- To determine the creditworthiness of the loan applicant
- To know about the repayment pattern.
- To check credit score
- To get a report on current loans and past loans availed
- Making effective lending decisions
- Determine the interest rates on loans
How to read your credit report?
A credit report is a detailed summary on a person’s credit history. The credit report includes details of credit accounts, current and past loans, credit cards and details of credit availed from a registered lender. Here is a list-wise breakdown that would help you read the credit report:
Personal information:This section has information on your identity. The list of details include name, address, current and previous accounts, date of birth and so on. You must check for any errors in this section. You can check incorrect information in this section like wrong address or name. You can report the errors to the credit rating agencies as this could be a sign of wrong data being reflected in the credit report.
Account information:The account information section contains information on your present and past credit accounts. As this is an elaborate section, you must take time and check it properly. Listed below are the details that must be checked:
- Date of opening
- Name of the creditor
- Current balance
- Highest balance or credit limit
- Monthly payment history
- Type of account
- Account ownership i.e. joint or single
- Payment status
You must check this section carefully to verify if the entries made are right. This section can be a little tricky as it reflects the balance and payment details, payment date of various accounts and so on.
Public record:This Section contains the reports of bankruptcy filed or the tax liens availed. The dates and details provided in this section must be cross-checked for any discrepancies as they negatively impact credit score.
Inquiries:The inquiries Section offers information on the enquiries made by the banks and financial institutions on your credit score. This is known as a ‘hard enquiry’. A hard enquiry is when you apply for a loan or multiple lines of credit. A hard enquiry impacts the credit score.
The credit report also includes details like payment history, credit utilization limit and account balance, opening date of credit, the status of loans (close or open, paid in full, not paid in full). The report also offers details on the new credit enquiries, collection records and public records, for cases in which you have filed for bankruptcy or a tax lien.
Why good Credit Score is important?
Having a good credit score makes financial life easier and helps save money. If you are searching for reasons to maintain a good credit score, here are some of the advantages of a good credit score.
Low interest rates on credit cards and loans:Banks and credit institutions make enquires on your credit score/credit report and then apply interest rates. A lower interest rate means lower EMIs and faster repayment of debts.
Better chances of Credit cards and loan approval:A good credit score convinces the bank on loan repayment capacity. So, a good credit score increases your chances of getting credit approved. A good credit score cannot be considered a guarantee as banks look at other factors like debt to income ratio, existing debts and so on.
More negotiating power:A good credit score gives you the upper hand while applying for credit. You can negotiate the terms of your loans. You can bargain and take advantage of the offers received from other credit institutions based on your credit score.
Get approvals for higher limits:The borrowing capacity depends on your income and creditworthiness. One of the main advantages of a good credit score is that banks are willing to lend more, if you have a good repayment history and have never defaulted on loans or missed EMI payments.
Why IndianMoney is asking me for my PAN and Phone Details for the Credit Score?
Your credit score is based on all credit accounts. These credit accounts are linked to your PAN which in turn is linked to mobile number. It is very important that your Credit Score is not disclosed without your consent, as it is very confidential information. We cannot generate the credit score and report without PAN and mobile number. We collect PAN and phone details only to show you the credit score.
Why is IndianMoney giving Credit Score for free?
The IndianMoney.com Mission is to help people avail the right financial products, through personalized free financial education. Our Vision is to become the most admired and trusted financial education company in the World. It is important for us to keep the public, financially aware. IndianMoney.com has tied up with CRIF Highmark to offer free credit score. IndianMoney.com is India’s leading financial education company which was formed to curb the misleading sales practices rampant in the financial services sector.
Want to know more on Credit Score? 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.
Difference between credit score, credit report and credit ratings:
We often come across terms like credit score, credit report and credit rating. Though the terms look similar they have a different meaning. The list below helps you understand each of these terms:
Credit score: The credit score is a numerical representation of your financial credibility. The credit score ranges from 300 to 900 points. The credit scores are generated by evaluating different aspects like your repayment history, credit card usage, late or missed EMI payments and so on.
Credit report: The credit report contains a detailed summary of credit history based on your past credit and loan details. You may have to pay a small amount to get your credit report. The information on your credit report stays for many years and any missed or late payments may affect your credit score.
Credit ratings: Credit rating is a score used to assign a rating to the businesses and companies. You can also avail a credit rating for free. The credit ratings are denoted using alphabets like A, A+ and so on. Like credit score, the credit rating is subject to changes based on the monthly data submitted by the financial institutions.
Why check your credit score regularly?
You can check your credit score for free through various online websites and aggregators. There are no charges; you can get free credit information and keep track of your credit ratings. Make sure to review your credit report. If you spot any errors in the credit report, then you can take the necessary steps to correct them. By staying informed, you can make better decisions and rectify the errors on time.
Staying informed helps remain updated while applying for a loan. Reviewing your credit report periodically ensures, there is no incorrect information or entries. While applying for a loan or credit card, it is important to make sure you have a healthy credit report and score to reduce chances of rejection of loan application.
How to resolve errors in the credit report?
A good credit report helps secure the loan or credit card easily. Various factors play an important role in building your credit score like credit utilization ratio, repayment history and timely payment of dues and loans.
Sometimes credit reports contain inaccuracies in the form of incorrect personal information, wrong credit account or any mistyped information. You must try to rectify the errors as soon as possible. A bad credit report may lead to financial problems. Some of the common errors found in credit reports are:
- Incorrect address or personal information.
- Wrong loan accounts reflecting in your name
- Inaccurate credit limits
- Errors in Account status
- Wrong Outstanding payments
- Incorrect Repayment history
- Duplicate accounts
To correct the errors in your credit report, you must file a dispute case. Here’s how to do it:
- Fill the form:You can raise a dispute case online with the credit bureaus like CIBIL, for any discrepancy in the credit report. Visit the website of the credit information agency and go to their dispute resolution section. Fill the form and specify the errors. You must submit the nine-digit number provided on your credit report which contains the dispute details.
- Process:Once you submit the online form, the credit information agencies verify your claim by approaching the bank. It must be noted that the credit agencies cannot make the changes in your credit report on their own.
- Dispute resolution period:Once the dispute is raised, it takes around 30 days to get it resolved. As per laws, the banks have come up with a formal dispute resolution within 45 days after the issue is raised. An e-mail notification is sent after the issue gets resolved.
How is Credit Score calculated?
Below mentioned are the factors affecting Credit Score:
- Age, Residential Address and number of IDs like Passport, Driving License and so on.
- Types of credit received (home loan, personal loan, vehicle loan and so on)
- Length of credit history
- Credit repayment history, settlements and write-offs
- Number of recent Credit Score hard queries (enquiries made by banks and financial institutions on your credit history)
- Total sum of credit availed and paid back
- Credit utilization
Hard Enquiries versus Soft Enquiries:
The Credit Score enquiries you make are called ‘soft’ enquiries. Soft enquires have no impact on Credit Score. It is advised to check Credit Score at least once every three months. Soft enquiries are used to self monitor Credit Score. Self monitoring is important as you get to know of any wrong information in the bureau’s database. You need to inform the bureau if you find wrong information reflecting against your name and failing to do so would negatively impact Credit Score. Self monitoring also helps understand your current credit position.
Credit enquiries made by banks and financial institutions on your credit history are called ‘hard’ enquiries. Hard enquiries are made when a credit application is received. Hard enquiries negatively impact your Credit Score as it shows you to be credit hungry and in desperate need of financial support. This would make lenders hesitate on sanctioning loans. More the hesitation from lenders more would be the interest charged on borrowed amounts.
Credit Score Range and What It Means
A credit score ranges from 300 to 900. The lowest credit score is 300 and the highest credit score is 900.
A credit score is a three-digit number, assigned based on repayment history and creditworthiness. A high credit score indicates you are responsible and make repayments on time. A high credit score increases your chances of getting credit cards and loans sanctioned. Let’s take a look at how credit score influences your chances of getting a loan.
A credit score of 800 and above:
A credit score of 800 and above is excellent. If you have a credit score above 800, banks are happy to sanction loans. You get loans easily and at low interest rates. People with credit score of 800 and above make loan repayments and credit card bill repayments in time, and there’s low chance of default.
A credit score between 700 to 800:
A credit score between 700 to 800 shows you to be financially responsible, when it comes to managing credit. This is a good credit score. You could have missed paying an EMI or the odd credit card bill. However, most of your repayments were in time. With optimum credit utilization ratio, banks are happy to lend, but at higher interest rates.
A credit score between 500 to 700:
A credit score between 500 to 700 is an average credit score. You better work on improving your credit score. You won’t get loans from the bank, but you can always improve credit score. Pay EMIs and credit card dues on time; maintain a healthy credit mix (Secured vs Unsecured loans), Check free credit report and credit score at IndianMoney.com, Get a secured credit card and don’t close old credit card accounts with long credit history. (This is payment track record).
Credit score below 500:
A credit score below 500 and you’re in deep trouble. This shows missed repayments, default on loans and credit cards and a general struggle to manage debt. Banks and NBFCs out rightly reject your loan application and even if loans are sanctioned, they are at very high interest rates.
| Credit Score Range | |
| Range | RangeGrade |
| 800 & Above | Excellent |
| 700-800 | Good |
| 500-700 | Average |
| 500 & Below | Poor |
Importance of Credit Score for Companies:
The credit information companies are also assigned with the task of preparing credit reports for companies, businesses and enterprises. The credit report for businesses and firms is closely reviewed by the government agencies and suppliers, so that effective decisions are made while offering business contracts.
The businesses and companies must provide their credit ratings while applying for various types of services like gas connections, electricity and water connections, telecom and internet and other types of services.
The credit report also helps businesses manage market risk by choosing their suppliers and business partners based on credit ratings. The credit score enables a party to make effective business decisions by identifying trustworthy service providers and suppliers.
The credit report for businesses offers detailed information on establishments, owners/directors, employee liability and assets owned by the company, profit and loss accounts, pending court cases and various other details. Extracting such reports can be expensive depending on the type of information offered.
Factors of Credit Score that impacts your life:
A credit score is denoted by credit rating agencies and is calculated using the credit information offered by financial institutions and banks. Given below are ways on how the credit score can impact your life:
Credit score for a home loan: As purchasing a house requires huge capital, people often resort to availing bank loans to finance the purchase. Banks offer home loans to customers for a long tenure, so that Home Loan EMIs are affordable.
Banks follow strict guidelines while sanctioning home loans. To qualify for home loans at affordable interest rates, you must have a credit score of 750 and above.
A good credit score instills the guarantee that you are responsible enough to handle debt. With a good credit score, you qualify for the best loan terms and interest rates on home loans. A low credit score may affect your home loan interest rates or may lead to rejection of the home loan application.
Credit score for a credit card: To avail a credit card that offers attractive discounts and rewards, you must have an excellent credit score. If you have an average credit score, then work towards improving your score and then apply for a credit card. To raise your credit score, make sure to pay your credit card bills and loan EMIs on time. Do not apply for credit cards with multiple banks at the same time, as this might impact credit score.
Credit score for business: If you want to establish a new business or expand an existing business, then you need business loans. Before applying for such loans, check your credit score. Business loans are generally approved by banks when you have an excellent credit score and good income.
Banks may reject your loan application if they are not satisfied with your credit score. A good credit history helps with quick approval of business loans as well as gives capacity to negotiate the loans terms and interest rates.
What Are the Changes in Credit Score?
A Credit score is calculated by several credit rating agencies like CIBIL, Equifax, Experian or Highmark. These agencies use different methods to compute your credit score. Though the banks submit the same set of information on the borrower, the information is processed differently by each of these agencies.
The information is computed through complex mathematical formulas or algorithms to get the credit score. There may be minor differences in the credit score issued by these credit rating agencies.
What is Credit Utilization Ratio?
The credit utilization ratio refers to the amount of revolving credit you are currently using, vis-a-vis the current amount of credit allotted. Your credit utilization can be calculated based on the amount of credit availed including credit cards, home and car loan, mortgages or personal loans.
Credit utilization is a big factor which affects credit score. Banks approve higher credit limits. However, in India, it is advised to keep your credit utilization under 30% of the approved credit limit. If you secure a credit card, make sure to use the credit responsibly. Try to pay the outstanding dues at the end of each month. If you come too close to your credit limit, it may affect credit score.
Credit Score for a Loan:
Credit score helps lenders understand repayment patterns and the capacity to manage debt. Credit score impacts loan approval, the interest rates and the terms and conditions offered by banks.
If you have a credit score ranging from 700 to 750, banks sanction loans. You may not qualify for the best terms and interest rates on your loans. The bank may also conduct an enquiry, before sanctioning loans at this credit score.
If you have a Credit score ranging from 750 to 900 then you can easily secure loans. A person with this score is preferred by the banks for various kinds of loans as there are lesser chances of a loan default. A credit score in this range means lucrative rates of interest and better terms on your loans.
How to improve your Credit Score?
Below mentioned are the steps to improve your Credit Score:
- Check your Credit Score regularly: Soft enquiries have no impact on your Credit Score, so check your credit score regularly and contact CIBIL/Experian if there are any discrepancies.
- Make repayments on time: It is important to pay EMIs on time in order to get a good Credit Score. Delay in repayment, settlements and write offs would have adverse impact, which makes it difficult to avail loans.
- Limit your credit requests: Multiple credit applications show you to be credit hungry and in desperate need of financial support. This would raise concerns on your financial state and lenders would hesitate to sanction loans.
- Limit your credit utilization: Limit your credit utilization as much as possible. It is good to maintain a credit utilization ratio (CUR) within 30%. For example if you have a credit card with credit limit of Rs 1 Lakh a month, then try to spend less than Rs 30,000. Maximum credit utilization shows you are credit hungry.
- Minimum payments: This is the minimum amount that you need to pay your lender/bank to avoid fines and penalties. Pay off all outstanding credit card dues within the billing cycle + grace period.
- Try to avail secured loans over unsecured loans: It is good to maintain a ratio of 80:20 vis-a-vis secured vs unsecured loans. Secured loans have low interest rates as collateral is pledged.
Benefits of good Credit Score
Having good Credit Score means you have a proven track record of managing debt responsibly. Below mentioned are the benefits of having a good Credit Score.
- Swift processing of loan application: A good Credit Score indicates you are financially well organized. This makes banks and Financial Institutions process loan application swiftly.
- Low interest rates: You can negotiate for low interest rates with lenders.
- Waiver of processing fee: You are likely to get a waiver in processing and other handling fees, if you have a good Credit Score.
- Better loan balance transfer opportunities: Banks and financial institutions are likely to approve your request for top-up loans. You can smoothly transfer the loan balance across lenders.
5 Credit Score secrets
Follow these points to get a good Credit Score:
- Pay your credit card bills/EMIs within due date. Payments past due date and collection notices have negative impact on your Credit Score.
- Don’t close your old credit cards, pay off the pending balance and start using them responsibly. Make regular payments on time to improve your Credit Score.
- Check your Credit Score once every three months and inform credit bureaus if there are any discrepancies.
- Apply for and use credit cards only when needed, having multiple credit cards and not making the payments on time, would have a negative impact on your Credit Score.
- Don’t utilize the full credit limit on credit card; try to limit the credit usage to 30%.
Why you should check your Credit Score regularly?
It is extremely important to check your Credit Score, at least once every 6 months. You need to contact CIBIL/Experian when you find any discrepancies. If you have not availed a loan and it is showing up against your name, then you must get it removed at the earliest, if not it will have an adverse impact on your Credit Score.
Checking your Credit Score regularly lets you know your current credit position. Checking your own Credit Score is called soft enquiry and has no impact. There is no reason why you shouldn’t check it often. So, go ahead and check to avoid problems that might arise when you are applying for important loans like home loan.
5 Credit Score myths that you should be aware of
- Credit Score increases with increase in salary: This is totally wrong. Income has no relevance to Credit Score. Credit Score purely depends on your past credit records.
- Availing credit cards decreases your Credit Score: Availing credit cards and not repaying is what hampers Credit Score. Using credit cards and making timely payments would actually boost your Credit Score.
- If my Credit Score is bad, I cannot get any kind of credit card: You can still get a credit card with bad Credit Score, but it would be a secured credit card. A secured card is secured against fixed deposits. You can increase your Credit Score by making timely repayments and then apply for unsecured credit card once your Credit Score is good.
- Closing old credit cards would increase my Credit Score: This is actually the opposite. Re-using old credit cards with timely repayment would actually increase your Credit Score. This is because there is long credit history of timely repayments.
- Once I pay off my old debts, my Credit Score will improve: No, this is not true. All write-offs, late payments and settlements would reflect in your Credit Report for up to 7 years and your Credit Score will surely be impacted by this.
What are Credit Reports?
Credit Report is a report of all the loans and credit cards availed by you in the past. RBI has mandated all banks and financial institutions to share all credit related transactions with credit bureaus like CIBIL. Credit Report is mandatorily checked by banks and financial institutions when they receive credit applications. It is used to check how well you have handled debt in the past. Banks and financial institutions check for repayment history, credit utilization, settlements and write offs, all of which are mentioned in the Credit Report. Willingness to repay is seen as timely payment of EMIs and closure of loans on time.
Why Credit Reports are used?
Credit Report is basically your credit history. This shows loans and credit cards availed and also any slip-ups while repaying. Lenders would closely analyze your Credit Report before they sanction credit of any kind. Most of the lenders in India decide whether or not to lend money after going through credit report. If they decide to lend, then at what rate, would be decided based on your Credit Report. The lenders would charge higher interest rates if you have poor Credit Score.
Paying EMIs past due date with collection notice would stay in your Credit Report for up to 7 years, while bankruptcy would show up in your report for 10 years. Write-offs, settlements and missed payments are red flags in your Credit Report and lenders would deny loans as they think lending is risky. If they still decide to lend, then they would do so at a higher rate of interest. In short, your Credit Report decides loans and interest rates.
Understanding the Credit report through key terms:
There are few keywords that are used in Credit Report and are mentioned below:
- Credit Utilization Limit: This is the maximum credit sanctioned and you cannot exceed this.
- Credit Balance: Credit balance is how much money you have used so far. The closer you are to credit limit, the lower your credit score. Credit utilization is usually calculated as a percentage that reflects how much credit you have utilized.
- Credit Score: Credit score is a numerical representation of an individual’s credit worthiness based on his/her credit history. Credit Score also depicts person’s ability to manage debt. It is very important to have good Credit Score in order to avail credit of any form, from banks and financial institutions.
- Grace Period: Period within which if you fully repay, you don’t have to pay interest on credit card. Most credit cards have grace period.
- Minimum Payment: This is the minimum amount of payment that you need to make to avoid penalties. Your lender may report this to credit bureaus, and it has an adverse impact on your Credit Score.
- Bankruptcy: Bankruptcyis the financial status of an individual or organization, who cannot repay debts to lenders. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debtor.
- Write-offs: Banks and financial institutions write off (waive off)bad debts that are declared not recoverable (like a loan on a defunct business, or a credit card outstanding due that is defaulted), by removing it from their balance sheets. This is done when the borrower refuses to repay the loan or when the lender is not able to trace the borrower.
- Settlements: If the borrower is not able to repay the debt completely, then he/she can negotiate with the lender and make a one-time settlement which is less than the actual outstanding balance.
Importance of Credit Reports for Companies and Businesses
Just like Credit Score and Credit Reports for individuals, businesses also have Credit Score and Credit Report. Business Credit Report is a credit track record of businesses’ financial responsibility and companies, investors and financial organizations use this to determine whether or not the business is worthy to lend to or worth doing business with. There are many bureaus that compute business Credit Score. Similar to individual Credit Score, higher the number, lower would be the risk for financial organizations to lend.
Following factors generally impact business Credit Report. Bankruptcy, legal disputes on a property related to the business, outstanding balances and payment habits, business size and years on file. Good business Credit Report can help you expand the business. Most banks, financial institutions, investors, and companies heavily depend on your business Credit Report when setting loan terms, determining insurance premiums, increasing lines of credit, or considering your business as a possible partner.
As an entrepreneur, treating personal credit and business credit separately is important. This distinction can prevent possible financial barriers that can stop your enterprise from expanding. This saves you from personal liability if your business suffers loss which leads to bankruptcy.
FAQs on Credit Score and Credit Report
Q: How Many Credit Score Reports Can I Check Free Per Year?
You are likely to get one free credit report each year, on checking credit score from the websites of credit rating agencies (Equifax, Experian and CIBIL). However, there are various online websites that allow you to check credit score for free as many times as you wish.
Q: Negative Effects of Bad Credit Score:
Bad credit score can jeopardize your financial life and may lead to:
- Higher interest rates on loans and credit cards.
- Rejection of credit card or loan applications.
- Difficulty in starting your own business or securing business loans.
- Banks do not consider you as a trustworthy borrower as a bad credit score hampers creditworthiness.
Q: How much time does it take to update a new Credit Score?
The credit score of people with missed EMI payments or those with debts can be improved really fast. Banks transmit information related to borrowers each month to the credit rating agencies. The credit report of a person is updated each month, but it may take some time before credit score goes up.
Q: How is CIBIL different from Experian?
A: CIBIL and Experian work in much the same way and generate credit report and credit score. Credit Score is a 3-digit number between 300 and 900 that shows credit worthiness of an individual. A credit score of 750 and above is generally considered good.
Q: Does renting or leasing a house affect a Credit Score in any way?
A: No, renting or leasing a house does not affect Credit Score in India in any way, unless your owner reports it to the credit bureaus. Renting or leasing a house is not considered to be any form of credit.
Q: Do late payments affect a credit score?
A: If you delay the payment for more than 30 days, then your lender may report it to the credit bureau. The extent of impact on your Credit Score depends on how late you make the payment.
Q: Does having too many credit cards affect a credit score?
A: Having too many credit cards is not advisable. Have limited number of credit cards and ensure you make timely payments. Having too many cards and missing payments on credit cards can hurt you by bringing down Credit Score. Ensure that you don’t utilize the full credit limit which would negatively impact your Credit Score.
Q: Who or what decides if I get my loan?
A: Your lender is the one who decides whether or not to sanction loans. Credit Score and Credit Report are two of the most important factors that would influence your lender.
Q: Why is PAN card required for checking the credit score?
A: PAN is one of the parameters that credit bureaus use to extract Credit Score. Having PAN is a must to check Credit Score yourself. This is because the database of credit bureaus is huge and many individuals can have same name, date of birth and address. But, PAN is the only unique parameter.
Q: Why do we need a phone number for credit score?
A: Phone number linked with your PAN or credit accounts is needed because the credit bureau has to be sure that the person viewing your Credit Score has your authorization. This authorization is enabled through an OTP sent on your phone number.
Q: Can credit score enquiries affect the score?
A: Soft enquiries have no impact on the Credit Score while hard enquiries have a negative impact. Lenders perform a hard enquiry each time you apply for credit.
Q: Will I get loans at lower interest rates considering I have Credit Score of 850?
A: Yes, you can negotiate interest rates with your lender. Lenders tend to sanction loans at lower interest rates on having good Credit Score.
Q: Can credit bureaus generate wrong Credit Scores?
A: Yes, when the information present in their database is wrong then wrong Credit Scores would be generated. So, you need to check Credit Score and Credit Report often to ensure there is no wrong information. You need to inform the credit bureaus on any wrong information, immediately.
Q: Does being a co-applicant or co-borrower for a loan reflect in my Credit Report?
A: Yes, it does show up in your Credit Report. Being a co-applicant or co-borrower means equal responsibility of repaying the loan, just like the main borrower.
Q: Does my Credit Score get impacted if I enquire about it?
A: No, self enquiry is considered as soft enquiry and this will not have any kind of impact on your Credit Score. Only hard enquires will impact your Credit Score.
Q: What Makes Your Credit Score Go Down?
A: Payment of EMIs past due dates, write-offs, settlements and going bankrupt would definitely get your Credit Score down. Bad Credit Score will decrease the chances of getting a loan sanctioned.
