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Thursday, May 12, 2016

Your Credit Report

 Your credit history is a record of your credit and repayment behaviour across all your loans and credit cards over many years. In India, there are three popular credit bureaus that issue a credit information report (CIR), also known as a credit report. These are CIBIL, Equifax and Experian. It is simple to apply for and check your credit history online through one of these credit bureaus. 

What is the basis of a credit report?
 
Lenders report details of loans and credit cards, including repayment behaviour, on a periodic basis to the credit bureaus. All this information from various lenders is collated into one comprehensive document that is known as the CIR. It is a compilation of data on the entire spectrum of the customer's credit-related activity including details on repayment record, credit card limit, previous applications for loans or credit cards, credit utilisation ratio, any settled or written off loans and other such credit-related activity. The credit bureaus make this data available to their registered member banks and other financial institutions as well as to individual customers. Lenders use this data to make lending decisions when clients apply for new credit, while consumers use this information to keep abreast of their credit-worthiness. 

An accurate, data-based credit report makes the loan approval process quicker and more transparent for both lender and borrower. Lenders do not need to spend valuable time and resources on conducting background checks while customers are reassured that their application is judged objectively on the basis of their credit behaviour rather than any subjective, and potentially arbitrary, decision by the lender. 

What role does a credit score play in your credit history?
 
 
 A credit score is an important component of a credit report and gives both lenders and borrowers a quick snapshot of the customer's credit-worthiness, to judge if they are loan eligible. A credit score is a three digit number between 300 and 900. All the credit data that is supplied to the credit bureaus, by lenders, on the customer, is subject to complex statistical analysis to arrive at a credit score – that reflects the probability of the customer fulfilling his debt obligations. The better your credit history, the higher your score will be. In general, having a credit score of 750 or above ensures that you have a good chance of having your credit application – whether for a loan or credit card – approved. 

If you are planning to apply for a loan, it is advisable to obtain your credit report in advance to check your credit score and to be forewarned about any issues in your credit history. This allows you sufficient time to work on specific areas to improve your score and credit profile to avoid loan rejection. It is a good idea to check your credit report a year in advance of applying for a loan. In general, it is a good practice to check your credit score periodically, perhaps every year, to keep yourself updated on your credit health and to avoid any nasty surprises when you do actually apply for credit. 

It is very simple to obtain your credit report and score with each of the three credit bureaus. They are authorised to provide you with your CIR and credit score if you apply for it with the requisite payment. With CIBIL, you can apply for and receive a credit report with score (or just a report without score) online. Once you log on to the website, you need to provide certain personal details such as name, address, PAN number etc. and make a payment of Rs. 500 through net banking/debit/credit/cash card. If the authentication and payment are successful, you will be able to access your report online shortly thereafter and a copy will be emailed to you as well. If you are unable to authenticate yourself online, you will be asked to furnish certain documents for verification and your report will be mailed to you upon authentication. You can access the site at https://www.cibil.com/online/credit-score-check.do

With Equifax, you can apply for a credit report and score online and a copy will be mailed to your address. You need to fill in the KYC Request form on the site, attach the self-attested copy of identity proof and address proof, make a payment of Rs. 138/- for a Basic Report and 400/- for a Score (only a DD is accepted), and send these documents by mail to Equifax. You can access the site at http://www.equifax.com/consumer/forms/credit_report/en_in

With Experian too, you can apply for a copy of your credit report and score online. You need to fill in the KYC form, authenticate yourself and make a payment of Rs 399. Upon verification, your report and score will be sent to you online and via e mail. You also have the option to obtain only your credit report without your score.
 
You can obtain your report at http://www.experian.in/consumer/index.html 


It is always a good idea to be aware of your current credit health profile and checking your credit report is the best way to do it. It is a quick and simple process that will save you many a potential headache later when you apply for credit.
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