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A credit score is a measure of an individual’s ability to pay back the borrowed amount. It is the numerical representation of their creditworthiness. A credit score is a 3 digit number that falls in the range of 300-900, 900 being the highest. You should always work towards reaching a credit score that is close to 900. A higher credit score offers you several benefits and helps you at the time of getting a loan or a credit card. Having a low credit score suggests you have not been a responsible borrower and have been slacking off repaying the borrowed sum. Credit scores are calculated by the credit bureaus in the country after taking into consideration several factors like the length of your credit history, repayment records, credit inquiries, among others.
When you apply for a credit card or a loan, lenders like banks and non banking finance companies check your credit score to see whether you have the ability to repay the credit. If you have a higher credit score, you are entitled to receive preferential pricing and get discounts on the interest rate. Moreover, a high credit score gives your the additional power to negotiate for better rates of interest on loans.
We need your PAN and phone details to extract your Credit Score from Experian. We assure you that your personal information is secure with us. We will not use your PAN or phone details for any purpose other than to extract your Credit Score. We will not share your details with anyone else. Pinky swear!
A credit score ranges between 300-900. You should always take measure to bring your credit score closer to 900. A higher credit score increases your chances of getting a good deal on loans as well as credit cards. Let’s take a look at the different credit score range:
Your Credit Score is computed by Credit Information Companies. There are four companies in Indian which do the job– CIBIL TransUnion, Experian, Equifax and High Mark.Let’s unveil the mystery around how these companies compute your score.
When you make a transaction—the one that is relevant to determine your score—banks send details about it to all four credit bureaus. To send details to all credit agencies is a mandate by the RBI. Essentially, banks keep Credit Information Companies up-to-date about your monetary habits. If a bank needs to check your Credit Score, they can approach any one of the bureaus. It doesn’t matter which one because all will have the same score for you– all four are equally authoritative and on par with each other.
After receiving information from the bank, credit bureaus get down to the task of collecting more information about your financial habits from other banks and financial institutions. The credit bureaus then processes this information to formulate what is called a Credit Report.
Now, what is a Credit Report? A Credit Report is your financial marks card. It contains your Credit Score. It’s wiser to check your score from time to time.
It is very important that you keep a close eye on your Credit Score. It is the best way to gauge your chances to get a line of credit. Another reason why you should track your score is to know if it dips, or if an error has been made by credit agencies while calculating your score. This will help you make timely amends.
Though the processes followed to compute your score might differ from agency to agency, your Credit Score calculated by all will be the same. This is because banks intimate the relevant information to all four agencies. Therefore, no matter which agency a bank picks to check your Credit Score, there will be no major discrepancy in it.
Of the four agencies, CIBIL, however, is the most popular since it was one of the first Credit Information Companies to start operations in India. This has fuelled the notion that CIBIL Score is more accurate than a score from other agencies. This, however, is not true. Banks give equal weightage to scores from all four agencies. Equifax, Experian and High Mark Credit Scores are as good to banks and other financial institutions as CIBIL Score.
BankBazaar has tied up with Experian, which means that we can help you check your Credit Score for free. Otherwise, it costs a few hundred rupees.
Though many believe this, it’s not true.
All Credit Information Companies, including CIBIL, create your Credit Reports which tell banks about you credibility. Second, CIBIL and the other credit agencies do not entertain requests from individuals to make changes to financial details in Credit Reports. Changes are incorporated when banks provide relevant information to these agencies. This ensures that information in your Credit Report is legitimate. After all, your Credit Score is one of the most important factors considered by banks when deciding about your loan or Credit Card application. Your Credit Score also determines the interest rate banks chalk up for you.
So make sure that you score big on this one!
BankBazaar feels that you should always be in complete command of your personal finances. In order to help you with this goal, we have made provisions for you to check your Credit Score for free. Knowing your Credit Score before applying for a loan can help greatly.
If you have a good score, you can be rest assured that your loan or Credit Card application will be processed without any hassle. You can even leverage a good score to ask your lender bank for better rates of interest and additional benefits. On the other hand, seeking credit with a poor score will further lower your score. Let’s not even imagine getting approval for a credit line. Hence, check your Credit Score before you apply for a financial product. Work up the score if it’s not in the acceptable range.
TIP: Credit agencies review and renew your score every few months. If you have a poor Credit Score, start managing your money wisely and pay your dues on time for a good few months. Credit agencies will reward you by boosting your score.
It depends on the kind of enquiry being made. There are two types of enquiries – hard and soft enquiry. Hard enquiries send your Credit Score down by a few points, while soft enquiries do not impact your Credit Score.
An enquiry made by an individual is called a soft enquiry. BankBazaar will make a soft enquiry on your behalf when getting your Credit Score from Experian. Hence, this will not impact your Credit Score in any manner. Moreover, checking your Credit Score on our website is free!
TIP: It’s wiser to check your Credit Score from time to time so that you stay in the know. Always check your Credit Score before applying for a loan/card. You will know whether your score will tide you over or if it needs fixing.
A hard enquiry is when a financial institution checks your Credit Score to take a decision on your credit application. Every time you apply for a loan or a Credit Card, the lending institution checks your score. Each time a bank checks your score, your score will dip by a few points.
TIP: If you are applying for a loan or a Credit Card, do not apply to many banks at the same time. Too many enquiries will hurt your Credit Score.
It is understood that having high balances on your credit cards can significantly reduce your credit score. Apart from that, there are several other factors that can hurt your credit score:
When you work on improving your credit, you should be very patient, so as to not get discouraged. Credit scores are calculated from your credit report. When you request for the score from multiple credit reporting bureaus, you may see a slight variance in the figures. This is fine, as long as the difference is not massive.
In order to understand how your credit score changes over time, you should know how often there will be updates to your credit report. Lenders/creditors usually report your credit information (both positive and negative) to credit bureaus once a month. So, technically your credit scores can change a little each month, based on the information that is updated.
Most of the changes in your credit score happen incrementally. Although you would not see changes instantly, over a period of time this can add up to a considerable amount.
However, there are certain factors that could instantly have a huge negative impact on your score. This includes a delinquency, i.e., a significantly late payment such as a 30-day delay on a credit.
Another big influence is the credit utilisation ratio. This refers to the amount you owe as debt as opposed to your credit limit. So, an increase in credit card debt will cause your credit utilisation ratio to rise, which in turn drops your credit score.
Consider another scenario in which you pay off all your credit card debts in one go. Your credit utilisation ratio will fall in this case. This would lead to a temporary hike in your credit score.
A bank or lender would check your credit score or report to review your credit management skills, based on the review, a lender may or may not give you a credit. It is advisable to keep an eye on the credit score before applying for a credit card or loan. If you have a poor credit score and you keep applying for credit, every reject will further lower your score.
A good credit score will empower you with the ability to negotiate the interest rates. The banks or lender would like to offer a credit line to someone with a better credit score.
Credit bureaus in the country compute credit scores after taking into consideration several factors such as your credit history, repayment behaviour, and credit type, among others. There are four credit bureaus in the country - TransUnion CIBIL, Experian, Equifax, and CRIF High Mark. They are licensed by the Reserve Bank of India (RBI). The financial institutions in the country send your credit details on a monthly basis to these bureaus. Each credit bureau has its own algorithm and method of calculating scores.
Let’s take a look at the four main factors and their impact on your credit score:
Payment history is one of the most important factors that affect your score. If you are not able to pay credit card bills and EMIs on time, it will have the highest impact on your score. It is advised to avoid delayed payments as well as missed payments, as they get reported and affect your score in a negative way. In order to get better deals on loan and credit cards, you need to have a high score.
Credit exposure is also known as the credit utilisation ratio. It is the amount of credit you use with respect to the total limit you have at any given point. Along with payment history, your credit utilisation ratio also has a high impact on your credit score. As per experts, you should ideally use only up to 40% of your credit limit. Having a low credit utilisation ratio suggests you are able to handle credit in a responsible way. Maintaining a high credit utilisation ratio will bring your score down and will impact future loan approvals. Therefore, it is advised to keep a tab on your credit expenses every month.
A long credit history works well for your credit score. It gives lenders such as banks and non-banking finance companies (NBFCs) insight into your repayment pattern over the course of time. It reflects your experience in handling credit. It is advised to keep your old credit cards open as they may have a long credit history as well good repayment behaviour. When you close your credit cards, you lose out on this factor and this could take a toll on your score.
It is better to have a good balance of secured as well as unsecured loans in your credit history. A home loan is an example of a secured loan while a credit card is an unsecured loan. A mixed credit helps boost your credit score. Also, it suggests that you are an experienced borrower who has handled different types of credit.
In addition to the type of accounts, the number of hard credit inquiries is also considered while calculating your score. Every time you apply for credit, the lender will pull up your credit report leading to a hard inquiry. It is better to avoid applying for credit lines with multiple lenders within a short period of time. Multiple inquiries in a short span will raise a red flag to lenders and they will be reluctant to offer you credit
You can check your credit score for free by visiting BankBazaar’s website. It is a good habit to monitor your score regularly as it gives you an idea of your credit health and also spot any discrepancies.
The credit score is updated on a monthly basis based on the relevant information provided by financial institutions. It is advisable to keep an eye on the credit score to determine your financial credibility while applying for a loan or a credit card. It will help you in avoiding the situation where your credit application are getting rejected due to a poor score. By monitoring the score on a regular basis will help in identifying mistakes and correcting errors before they are too late.
When you are obtaining your credit score or report, it is considered to be a soft inquiry and it doesn't have any adverse impact on your score. When the bank or lender inquiries for a credit report, it is referred to as hard inquiry and it can reduce your score. You can be rest assured that your credit score won't get impacted due to soft inquiries.
A credit score inquiry through BankBazaar would require furnishing PAN card details along with phone number. This information is required for verification purpose only to identify you as the owner of the report. The credit score is completely free in addition to the process being simple and fast.
If you have a good Credit Score, you can avail loans and Credit Cards faster and with ease. Check yours now!
Get The Best Credit Card - A good Credit Score may get you the best of Credit Cards. Get a feature-loaded card and reap the benefits.
Quick Loan Approval - A good Credit Score works like an expressway for your loan application. Banks may approve your application quickly and readily.
Better Interest Rate - With the backing of a good Credit Score, you can bargain for a lower rate of interest on loans and Credit Cards.
Loans Made More Affordable - Loans come saddled with processing fees and many other charges. You can bargain your way out of some of these charges with a good Credit Score.
Check your Credit Score right away and see if you are eligible for all these benefits. You can check your score on BankBazaar at zero cost.
Credit Score is one of the most misunderstood topics in the financial book. Here are four secrets to help you understand your Credit Score better.Credit Score ? Credit Report
Your Credit Score is calculated based on information present in your credit report. Your credit report presents details about your credit accounts, credit application and debt repayment, among others.Checking Your Score Will Not Hurt It
When you or a company enquires about your Credit Score, it’s called a soft enquiry and it does not hurt your credit score.Credit Score Math
There are five prime factors that go towards deciding your Credit Score. They are - debt repayment, credit utilisation ratio, average credit age, type of credit account (secured / unsecured) and Credit Score enquiries made.Keep An Eye On Fraud
You did nothing wrong and yet your Credit Score is low? Please go through your Credit Report thoroughly and immediately report any unauthorized activities to your bank to correct your score.
It’s important that you check your Credit Score regularly. BankBazaar has partnered with Experian and we will fetch your Credit Score at no cost. It’s just a matter of a few minutes.
Given the interest rates edging up this year, maintaining a healthy credit score is vital. Credit score directly influences whether you will be eligible for a loan and how much interest you will be paying back. Higher the credit score, lower is the interest rate and the vice versa. Any lender before approving a loan application or credit card application analyses multiple factors and one of the major aspects is checking the credit score that can drastically drop the chances of the loan getting rejected.
If the lender assumes you as risk borrower even though they will approve your application, but the chances are high that the interest rates will be tremendously high. So, before you plan to get an application approved keep a track of your credit score on regular basis either by taking free CIBIL score or subscription based CIBIL score. Scores normally range from 300-850. While above 750 is considered as a good credit score and can get your application approved in lower interest rate, scores below 750 shows your defaults that can increase your interest amount. If your score is below 550 chances are high that you loan application may get rejected. So, track your credit score for free from the various credit bureaus.
Credit reports are a summary of an individual's credit history. The report contains details of the credit and loan history along with other basic details. Most lenders (banks) use the credit reports in making effective lending decisions. In a credit report, you will find information related to all types of loans and credit account, the report will also contain details such as the name, date of birth, PAN card number, address, etc. You can also find details related to the last credit report check performed by a lender. In India, there are four major credit information companies (CIC)) that provides credit reports of individuals. Some of the CIC offer a free credit score check while the other don't, however, lender pay a fee while obtaining a credit report of an individual. When an individual applies for a loan or a credit card, the bank will review their credit report before approving the loan/credit.
The CICs collect the individual's information from financial institutions such as banks as well as government agencies such as the Income Tax Department. These reports help the lenders in minimizing repayment defaults by avoiding individuals with a bad credit history. Though the banks are not solely relying on these credit reports to give out loans/credit, these reports play a crucial role in the calculation of eligibility.
The CICs will evaluate an individual's credit history to calculate a score that represents the individual's credit worthiness. Each CIC has their own method of assigning the score, however, a high score will indicate a healthy credit score while a low score can decrease the chances of loan application approvals. Most of the CICs will provide you with a free credit score while a fee is charged towards the credit reports.
The credit reports are used by lenders such as banks to determine the repayment capability of a loan/credit seeker. The credit report provides a useful insight into understating an applicant's past credit repayment behavior. A credit report will also contain information related to late or missed payments that can adversely affect your credit score. When an applicant applies for a loan/credit, the lending institution will look into the credit report to determine whether you will be able to repay the loan amount. There can be various reasons for obtaining a credit report, such as:
You can refer to any CIC's website to check whether you can purchase a quick credit report of yourself. These reports will help you in keeping a close tab on your credit score that can be useful while applying for any type of loan/credit. Reviewing the credit report periodically will also enable you to report any incorrect entries/information. If you are planning to apply for a loan/credit card, it is essential to make sure that you have a healthy credit score and report so the chances of loan application approval are higher.
Most CICs offer credit reports through online and offline mediums. The individual will require producing of required details and make a payment to get his/her credit report.
The following documents and details are required for obtaining a credit report online:
The following documents and details are required for obtaining a credit report offline:
The online process will be quicker compared to the offline method, however, you can track the status of your credit report for free. The CIC will typically email the password-protected credit report to the individual when the credit report is requested through the online facility. In the case of offline application, the credit report will be sent through postal/courier services.
Most often, the term credit score, credit rating, and credit reports are confused with the meaning of the other term. However, the following list should help you in understanding each of the terms:
When you apply for credit, the lender will assess two metrics that helps them take a decision on your creditworthiness. These are your credit score and credit report. For a better understanding of these factors, we have differentiated them in the table below:
|Credit Report||Credit Score|
|Your credit report has information on the current and past credit agreements that you hold. These include mortgages, credit card accounts, student loans, and inquiries on your credit history.||A credit score is similar to a grade that is provided to your credit report. It is a 3-digit number that usually ranges from 300 to 900.|
|The credit report is a reflection of your credit management, and you have control over the listings there.||The credit reporting bureau assigns you the credit score based on your credit history.|
|The credit report gives an outline on how much you owe your creditors over an extended period of time, whether you have been making payments consistently, and for how long each account was open. The report also lists associated public records against you, such as court judgements, bankruptcy filings, etc.||A high credit score indicates that you are a low risk borrower, making you more likely to qualify for a loan.|
|In order to access your credit report, you can get in touch with credit reporting agencies or use a credit monitoring service that offers you this information.||Your credit score is a part of the exhaustive credit report that you receive from the credit bureau.|
Similar to individual credit reports, the CICs prepare credit reports and assign credit ratings to businesses and all other types of firms. The credit report for businesses is closely reviewed by suppliers and government agencies while providing utility and business contracts. In fact, business and companies are required to provide their credit rating while applying for electricity, gas connection, phone, internet, and various other types of services. The credit reports also help businesses in managing market risk by carefully choosing their suppliers and business partners. The credit report enables the reviewing company to make business decisions with confidence.
The credit reports for businesses provide information related to the establishment, owners/directors, employees, profit and loss, liability, assets, pending court cases (if any), and various other details. These type of credit reports can be expensive based on the amount and type of information it offers.
If you are going through the credit report for the first time, the information and technical terms can turn out to be a little overwhelming. There are various acronyms that can sound similar to other terms, however, the following list will help you in knowing few of the key terms:
NA or NH: If you never owned a credit card or took a loan, there are chances that you will see an NA or NH on your credit score. NA or NH indicates that are there no, little, or insufficient credit activity to create a report or to generate a credit score.
STD: Applicable to an individual's credit report where the payments are made with the due dates.
SMA: Applicable on a credit report when the borrower has delayed the repayments.
DBT: This indicates a doubtful situation where the credit information has been inactive for over 12 months.
LSS: A credit report can be remarked as LSS if a lender reported the loan/credit card account as loss or if the account remains as a defaulter for a longer period of time.
DPD: Days past due (DPD) indicates the number of days that the account has not received a payment. Written Off/Settled Status: In a situation where the borrower could not make the repayment but came to an agreement with the lender for either a repayment plan or a settlement will indicate a written off or settle status.
A credit report is a detailed account of a person’s credit history. The credit report will include details of your credit accounts, like, credit cards, auto loans, home loans and any other form of credit availed from a registered lender. The credit report will also include details like payment history, credit limit and account balance, opening date of credit, status of loans (close or open, paid in full, not paid in full). The report will also include new credit inquiries, collection records and public records, for cases in which an individual has filed for bankruptcy or a tax lien. A credit report can seem like quite an intimidating document to read, but listed below is a section-wise breakdown of how a person should read his/her credit report:
Personal Information : This section of the credit report will contain information pertaining to the individual’s identity, such as, the person’s name, address, current and previous accounts, date of birth, etc. An individual should check the details provided under this section, if there is an incorrect address in the report or the person’s name has been misspelled, he/she should report this to the Credit Rating Agency (CRA) as this could be a sign of wrong data being reflected in the report or credit fraud.
Account Information: This section of the credit report will carry information pertaining to the person’s present and past credit account. The individual should check the details of this section carefully as this is quite a detailed section. The following details should be checked:
The individual should check the details in this section to verify that they are accurate. The balance reflected in various accounts are on the statement date, this can be a little confusing, as it may reflect a balance even if the individual has paid off in full or may show account that were closed prior to receiving the Credit Report.
Public Records: This section of the Credit Report will list and bankruptcies filed by the individual, tax liens availed by the individual or collection accounts. The dates provided in this section should be checked as they will directly affect how long they will appear on an individual’s credit report and affect the person’s credit score.
Inquiries: This section carries data pertaining to any inquiries made by companies regarding an individual’s credit score. If an individual applies for multiple lines of credit, this could affect his/her score negatively. In most cases inquiries do not affect a person’s credit score, as they are soft inquiries by lenders for promotional purposes. A soft inquiry is generated when the request for the credit report is not related to the individual’s request for credit.
A great Credit Score is anything above 800. If a bad Credit Score is the bane of your life, you can use the following tips to send it soaring. Want to know your score?Be Frugal
Keep your credit utilisation ratio at 30% for a good Credit Score. If you are struggling to stay within this limit, then get a card with a higher top limit.Seek Variety
A combination of secured and unsecured debt will send your Credit Score upwards. A Credit Card is an unsecured debt whereas a Car Loan is a secured debt.Advantage of Old Credit Card Accounts
Think twice before you close an old Credit Card account as long running accounts add more value to your Credit Score. And if you are not using your card, keep it safe to prevent misuse or fraud.
When it comes to credit reports, scores, or any debt in general, traditional perception is often seasoned with myths and misinterpretations. So you should not let that information influence your financial conduct. You should understand that credit is a financial tool/facility like any other. Its neither good nor bad on its own. The way in which you use it is what gives it a good or a bad flavour.
Listed below are some of the most common myths about credit that you should know:
When you approach a lender for a loan, four elements of your credit report are analysed:
If there is no established credit history for you, you just have to get someone to co-sign or authorise your loan. In case you do not have someone who can co-sign for you, you can explore the option of getting a secured credit card. This type of card requires you to put up cash as collateral. Once you start using the credit card, you will be able to establish a credit history. It is important that you make payments on time and use credit conservatively. Be patient, as it will certainly take time to build a credit history. Once your credit history is periodically evaluated, if you have a good standing, your credit score will increase.
If an individual accesses his/her own credit report, it will not have a negative impact on the score. In fact, it is a healthy practice to check your credit report at least on an annual basis. Reviewing a report results in a “soft inquiry” that will only be reflected in a personal credit report. When a lender reviews the credit report, a “hard enquiry” will be added. These hard enquiries are shown to other lenders who review the report in the future, as these may represent new debts that are not yet visible on the credit report. Too many hard enquiries can have a negative effect on your credit score.
A bad credit report can be rebuilt over time. The report shows all credit issued under the consumer’s name. It also shows all items that are closed or inactive. If you have missed payments or have made late payments, it can remain on your credit report for up to 7 years. In this time, you can rebuild your credit report by paying your dues on time, looking for better credit choices, and being judicious while spending. You have to remember that an old negative information in the report is less important than a recent positive one.
Credit bureaus are not owned by the government. However, the government has laid down many laws on how these should operate.
Using cash for all payments is certainly not better than using credit responsibly. This is because a consumer has to develop a credit history (displaying responsible credit usage) in order to establish a good credit score. If a consumer does not hold various types of credit accounts, his/her credit score will not be as good as another individual with a history of responsible credit usage.
The PAN card is required for obtaining the individual’s score accurately. The credit score can also be obtained by using other valid Proof of Identity (PoI) instead of the PAN card. The PoI helps in identifying individuals in the database.
No, the inquiry will not affect your credit score. When you apply for a loan or a credit card, it can have a slight impact on your credit score but when you are checking your credit score it is not.
The phone number helps in identifying individuals accurately. Your credit report will already have your phone number, when you provide your phone number, it is verified against your records to ensure you are the right recipient for your credit score.
There are no limits to the inquiry of credit score. You can check for your credit score as many times as you need to. The inquiry for the credit score is considered as a soft check while only hard checks can impact your credit score.
The credit score depends on the credit report changes, as and when the changes are made to the credit report, the credit score would change depending on the positive or negative impacts. For example, when you are applying for a credit card or loan, making payments towards the credit, it will impact your credit report and the score.
The credit score range can vary depending on the assessor, however, the value will represent the same level of creditworthiness. The credit score summary will also indicate the health status, it will tell you if a particular score is excellent, good, average, or poor.
Credit score may vary based on the credit rating company. The credit report and score will provide you with an indication of whether you have a good or bad score. A good score with a particular assessor will more likely to have a good score with another assessor.
There are few factors that are considered while calculating an individual’s credit score. Primarily, the account information that includes information of credit cards and loans, the public records containing information pertaining to tax lien and bankruptcy, and the hard inquiries made by your lenders will be accountable for the calculation of credit score.
This will depend on your credit history. If you have multiple credit cards with a higher limit and you are under-utilizing or over-utilizing it, this can impact your credit score negatively.
The following information will be included in your credit card report:
A credit report won’t contain any information related to your checking or savings accounts. Also, the information pertaining to criminal records, medical history, lifestyle, and other details are not included in the credit report.
This will depend on various factors such as the inclusion of hard inquires, payment details, credit card, and loan applications. As soon any changes are detected, your credit report would change. The information is obtained on a monthly basis for the changes to be implemented. If you find any error on your credit report, you are recommended to get it corrected from the assessor.
Unless it is incorrect, no details can be deleted from your credit report. The credit report provides an insight of your credit history and lending worthiness. Most lenders vastly depend on the credit reports to assess the lending risks.
If you notice any error or wrong entries in your credit report, you can get in touch with the credit report provided to get it rectified. The process is simple, you can get in touch with your credit report provider through phone, email, and other mediums.
No, the Credit Information Report contains details of credit history and inquires, CIBIL, like various other credit rating companies have their own method of calculating the score based on the information on the credit report. The Credit Information Report has all the details of an individual’s credit date while the CIBIL score indicates the credit worthiness. The CIBIL score is derived from the information available in the Credit Information Report.
Your credit report can be accessed by you, lenders, and government recognized regulating bodies.
The lenders refer to the credit score to determine the credit worthiness of individuals. It helps the lenders or the banks to understand the risk factors involved in lending out money to an individual.
No, the CIC collects information from various financial institutions but doesn’t change any data. The CIC compiles information related to credit transactions and payment histories of an individual.
A score of 700 and upwards has a higher chance of approval for credit card application. The banks might hesitate to give you a credit card if the score falls under 700.
Experian’s credit score ranges from 300 – 900. 900 being the highest score.
There are instances where you can find yourself rated differently. India has four credit rating agencies formed and authorised by the Reserve Bank of India (RBI). They are CIBIL, Experian, High Mark, and Equifax. The parameters and the credit rating module used by each of these agencies will differ. The amount of importance placed on each of the considerations will also vary. For instance, payment history, which is one of the normally considered parameters, shall be weighed differently. As a result, you are rated differently.
In the formal banking system, the agencies garner the credit details of every customer from Non-Banking Financial Institutions (NBFIs) and banks. The information is massive. It includes details such as account history, payment history, deferred payments, missed payments, loan applications, loan approvals and disapprovals, credit accounts etc. You may transact with many bankers, licensed brokers, and NBFIs. All lenders may not report to the same agency. When you are picked up by different agencies, there can be a minute difference in your rating. All credit crores are equally valid.
Experian was licensed in 2010. An individual is rated in the range of 0 and 999. 961-999 is considered excellent, 881-960 good, 721-880 fair, 561-720 poor, and 0-560 very poor.
CIBIL was licensed in 2009. CIBIL uses advanced analytics. An individual is rated in the range of 300 and 900. Anything above 750 is considered good. The parameters include credit exposure, credit utilization, credit history, and credit type and duration.
EQUIFAX was licensed in 2010. An individual is rated in the range of 300 and 900. The parameters used include account categories, the number accounts, consumed and available credit, credit history, and the length of the payment history. Anything more than 750 is considered excellent, 700-749 good, 650-699 fair, 550-649 poor, and anything below 550 bad.
High Mark was licensed in 2010. The lowest credit score is 300 and the highest 850. An individual with a good score is considered more potential than an individual with a poor score.
How your credit score is interpreted is more important than just a number.
Checking credit reports once a year seems ideal unless you have some strong reasons to review them frequently. A free copy can be obtained via any of the rating agencies that compute the credit score of a customer using these reports. No information is shared among the agencies. In lieu of reviewing a single report, be advised to review all the reports at the same time if it was not done earlier. Check the details thoroughly and make sure they are error-free. Dispute the errors or the wrong information if any.
Credit scores can be reviewed based on your comfort zone. Checking yearly may seem adequate for some, but a majority of people prefer reviewing monthly or even weekly. Despite how frequently you check, your score should not be impacted. Be focused on the overall trends in lieu of daily trends. Credit scores can be frequently checked in the following circumstances:
A credit score tends to change from time to time. A lower score may turn higher or a higher score may turn lower depending upon your credit reports. A person can also maintain a consistent score. Being well-rated is always better for many reasons. You can have multiple checks. If you notice a reasonable hike in your score compared to the previous review, you can:
Yes, credit reports contain your overall banking history and are used to assess your credibility, which is your credit score. A free copy of your credit report can be obtained once a year from each of the credit rating agencies that include CIBIL, Mark High, Experian, and Equifax. You can also request for obtaining all the credit reports at once.
A sound credit history is useful to apply for a loan. It shows how effectively you have managed to repay the earlier obligations. If you have never used a credit card or never borrowed a mortgage, your credit history stands nil. Lenders may not issue a credit card or prolong a loan. Consider the following ways to build credit with no credit:
Yes, you can. Over 8 million adults are affected by identity theft every year. Review your credit reports once a month. Be safeguarded by obtaining an updated credit report to review for any doubtful fresh accounts. Observe the below cited general identity theft signals on your reports.
Staggering credit growth is a huge challenge that the banking industry is now facing in India. The Reserve Bank of India Governor Shaktikanta Das had said that it is crucial that banks focus on prudent lending. The credit growth in India has moderated to 7-7.5%.
He had added that the main challenge in India is a slow credit offtake and this, in turn, affects the profitability of all banks in the nation. In order to facilitate a faster flow of credit, the RBI has now taken a lot of steps. These include reduction in repo rate, provision of long-term repo operation and facilitation of bank refinance to NBFCs. These measures will help in boosting the operational efficiency of banks. The governor had said that the performance of a banking system lies on the strength of its corporate governance. He had added that the RBI can lay down a few rules and guidelines but eventually the responsibility lies on the banks.
The RBI will be issuing the draft guidelines on corporate governance in the private and public sector banks. The governor had also added that the RBI's aim is to improve the efficiency of its regulatory and supervisory functions. While talking about NBFCs, he had said that credit flow to all small NBFCs has been increasing over the past year. A lot of aspects of top 50 NBFCs like the asset-liability management (ALM) position are now being assessed and monitored. This includes all NBFCs that have assets above Rs.5,000 crores.
24 March 2020
Reports from credit bureau indicate that women are getting a lot more credit conscious as compared to men. Lenders now prefer to lend to women as there is a higher chance of them repaying loans.
Between the age group of 36 and 50, the number of women borrowers have boosted by 33% since December 2017. A study by credit bureau Crif Highmark has revealed that the number of women borrowers over the age of 50 has increased 41%. A study by credit bureau Transunion Cibil shows that the self-monitoring rate among women has increased by 62%. This means that more women are frequently assessing their credit score and becoming more credit conscious.
Around 56% of the self-monitoring women are from Tamil Nadu, Telengana, Karnataka, Delhi and Maharashtra. Sujata Ahlawat, VP and Head of Direct-to-Consumer Interactive, TransUnion Cibil had said that women have a better credit profile than male counterparts. This will, in turn, translate into wider access to credit and also faster and more efficient loan approvals
9 March 2020
According to Reserve Bank of India (RBI) data, bank credit growth slumped by 8.5% for the month of January from 13.5% a year ago due to sharp slowdown in loans to the retail service sector.
Growth in advances in the service sector fell from 23.9% to 8.9% in January 2020. However, personal loan segment during the month grew 16.9%, while credit to housing loan grew by 17.5% to 18.4%. Education loan during January declined by 3.1% in comparison to the negative decline of 2.3% in January 2019. Credit growth fell from 5.2% to 2.5%.
5 March 2020
Shaktikanta Das, the governor of the Reserve Bank of India, has encouraged banks in the public sector to enhance their credit growth. Reports suggest that the central bank had said that it was not satisfied with the muted credit growth in banks. According to the latest data released by the Reserve Bank of India, the credit growth fell by 8.5% in January, marking a stark decline from the 13.5% recorded in January last year. The Reserve Bank also encouraged banks to make the most of the long-term repo operations window in order to ensure that credit is pushed to certain sectors, and ensure that it is not used for treasury operations and the like. Many public banks are currently sitting on heavy liquidity and the LTRO window is not being used. The Reserve Bank of India, in its February policy, had made an announcement according to which a 1 lakh crore long-term repo auction would be available for lenders to borrow 1 and 3 year loans at repo rate. The central bank also asked for a report on the cases resolved under the June 7 circular that it had issued on stressed assets.
4 March 2020
Crisil has just announced that they expect bank credit growth to shoot up and rise 200-300 basis points by the time the next fiscal year. The share of retail loans in the bank credit will rise 400 basis points up till 28% till March 20201.
The credit rating agency also mentioned that the market would see corporate loans go through anemic growth during the current fiscal year. Economic activity in the market is slowly picking up pace. The overall demand for retail loans are also shooting up.
This trend promises a better credit growth for the next fiscal year. The rating agency had said that the slowdown in bank lending during this fiscal have bottomed out and the gross credit will boom to 8%-9% in 2021.
27 February 2020
The GDP forecast of India has been cut down to 5.4% for 2020 and 5.8% for 2021 according to Moody’s. The original GDP of the country for the current year and the next was 6.6% and 6.7% respectively. Moody’s has also revised the global GDP to be cut down due to the effect of the Coronavirus over the economy.
G-20 economies are expected to grow at 2.4% in 2020 which is a lower rate when compared to the previous year followed by 2.8% in 2021 according to a report by Moody’s. The growth predictions for China as well have been lowered to 5.2% in 2020 and expect to maintain the growth of 5.7% in 2021.
The growth projections of Mexico and South Africa is also said to be lowered like India due to the domestic issues the countries have been facing along with the constant external factors playing a direct role in the economic growth.
According to experts, the revival of domestic demand in rural and urban areas would be a key factor to strengthen the economic momentum of the country. Credit growth resumption, according to Moody is essential for the economy as well.
18 February 2020
Indian companies have seen their credit profiles deteriorate over the past 9 months due to a decline in the country’s GDP growth. One of Fitch agency’s arms, Ind-Ra (India Ratings), has downgraded over 180 issuer ratings in comparison with 103 upgrades between April last year and January this year. As such, a deterioration has been caused to the downgrade to upgrade ratio, from 0.86 in the previous financial year to 1.83 in three quarters of this fiscal. The value of downgrades stood at Rs.1.53 lakh crore and the upgrades were valued at Rs.49,600 crore. Financial sectors that were laden with debt were the main contributors to the same.
According to Ind-Ra’s director, Arvind Rao, macroeconomic parameters faced sudden and sharp changes that went way beyond the regular stress that the ratings take into consideration. As a result, the deterioration was higher than expected. He also added that the ratio is rising with each passing quarter due to revisions in GDP estimates. The ratio has increased from 1.59 during the first quarter of FY20, to 2.03 in the second quarter, and 2.75 in the third. The GDP forecast has been revised five times by Ind-Ra, from the initial forecasts of 7.5% to 5%.
7 February 2020
With the Reserve Bank of India (RBI) directing that the interest rates on retail loans should be linked to an external benchmark, Public Sector Undertaking (PSU) banks have started offering interest rates differentially based on the credit score. Interest rates that are pegged to credit scores is likely to be the norm in the future. Consumers are being categorised into specific risk buckets based on their credit scores and other parameters. This means that the higher the credit score, the lower the interest rate will be. One of the first banks to start this was the Bank of Baroda which has 4 different categories for customers of its retail loans. These are divided into prime customers who have a credit score above 771, which is the CIBIL Vision score, those with scores in the range of 726 and 771, those between 701 and 650, and those who have scores up to 650. Those who have the highest credit scores are offered the lowest interest rates and vice versa. Those who have very short or new credit histories also get charged higher interest rates. The interest rates can have a difference of up to 100 basis points, starting at 8.15% as the lowest rate.
Syndicate Bank has three categories of customers, which are those who have a score that is more than 750, those with scores between 650 and 749, and those who have scores between 600 and 649. While there are other risk metrics, interest rates range between 8% and 8.50% with a difference of approximately 10 basis points for higher loan amounts. Union Bank has two categories and Canara Bank has four categories. Bank of India has three categories.
Non Banking Financial Companies (NBFI) and private banks have not yet started differential pricing for retail loans.
28 January 2020
In the report of the World Bank’s Ease of Doing Business 2020, India jumped by 14 places and reached the 63rd position. There are a total of 190 countries in the report. Under the 10 parameters used for judging, India improved in a total of 6 parameters.
The parameters that India improved on were getting electricity, paying taxes, resolving insolvency, trading across borders, dealing with construction permits, and starting a business. The country’s performance was the same in enforcing contracts, protecting minor investors, and getting credit. However, the country’s performance fell for the property registration parameter. There were speculations that Kolkata and Bengaluru would be included in carrying out the study. However, only Mumbai and Delhi continued to be included. The target that was set by Prime Minister Narendra Modi was to break into the to 50 within this year. However, India must wait at least 1 more year to achieve this target. The index ranking of the country has gone up by 23 places to 77 when compared to last year. According to the report, the other countries that noted improvement were Nigeria, China, Kuwait, Pakistan, Tajikistan, Bahrain, Togo, Jordan, and Saudi Arabia. The report further added that regulation of encouraging efficiency and supporting freedom of doing business are analysed by ‘Doing Business’.
24 October 2019
Among the many public sector banks in the country, Bank of Baroda, Union Bank of India and Syndicate Bank have taken steps for the transparent division of retail loans. This segregation will be done into their versions of prime and subprime risk exposure.
These banks have offered the potential borrowers different home loan interest rates by using third-party credit scores. Under the new external benchmarking scheme, the above-mentioned public-sector banks will be using three credit score slabs from the Credit Information Bureau India Limited (CIBIL) in order to price their home loans.
The customers who have a high credit score, above 760 out of 900 will pay an interest rate of 1% less when compared to the people who have credit scores between 675 and 724.
People who have credit scores of above 760 will be paying an interest rate of 8.1% on new loans offered by Bank of Baroda. However, people having a lower credit score will be paying an interest rate of 9.1% per annum. The finance cost for the people who have a medium-range in the credit score will pay an interest rate of 8.35%.
The floating rates at these banks are linked to an external benchmark where the interest rate would not depend on the sum of the loan or the duration.
10 October 2019
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