A credit information report contains detailed information of your credit history, including your identity information, credit accounts, loans, payments and recent enquiries. In addition, the report also typically has a credit score.

Credit Score is a numeric summary derived from your repayment history of previous or existing loans and credit cards and from the enquiries performed by banks & financial institutions based on your loan application. Your Credit Score is based on the information in your credit information report. Higher the score, the more favourably it is viewed by banks and financial institutions.

Changes in credit score

Credit Score changes over time, as your circumstances change. For example, paying off a loan could result in a higher credit score, while missing several repayments could reduce it. Every credit information company has a separate range for credit score. There is no standard cut‐off for a good score for a loan application. Lenders set different thresholds for accepting a credit / loan application. These thresholds can also vary according to the type of credit you want, so you could be accepted for a home loan application but your application for a personal loan may be rejected. Lenders may grant someone credit for a credit score of “X” when another bank / lender refuses.

Review your credit report on a regular basis

Review your credit report regularly to make sure it’s up-to-date as mistakes can hurt your credit score. In particular, check those credit accounts where you have stood as a guarantor or you are a joint account holder to ensure repayment is as agreed with the lender. In case of a settlement, it is important for you to know how the loan has been treated. Ask the lender whether it would be considered a waiver since a settlement is considered more negative than a loan repaid in full, but more positive than a default. It is important for you to follow up with the lender and ensure closure of old dues, if any.

Pay On Time

All repayments – and missed ones – are recorded on your credit report. Pay your EMIs on time and as agreed. Stay within the agreed credit limits and make necessary credit card monthly repayments in full and on time. If lenders see a patchy credit history that shows missed repayments, it suggests that you struggle to manage credit effectively and negatively impact your credit score.

Space out credit applications

A lender will likely check and leave a credit application search on your credit report each time you apply for new loan or credit card. Inquiries made by lenders because of an application you made for credit or loan can affect your score. Space out your credit applications and limit making several applications in short intervals of time. Too many inquiries might mean that you’re taking on too much loan or that you’re in some kind of financial trouble and are looking for credit to help you out. Shopping around for the best deal in terms of best interest rate for home loan or a new auto loan shouldn’t cause a problem but always make sure that the lender knows you are asking only for a quote and not making an application for loan or credit.

( The writer is Managing Director, Experian Credit Information Company of India. )

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