September 13, 2024 · 11 mins read
How To Read Your Credit Report
Santosh Kumar
Gaining a credit report guide is essential. A credit report is a document that contains the credit history of an individual. It includes information about the credit accounts as well as details of payments towards those accounts. The credit report is referred to by the lenders when processing loan applications. It has various other significance, which makes it important for people to maintain a good score.
Read More: CIBIL Score Role in Loan Application Process
Obtaining a credit report guide is essential as lenders use credit reports as a way to judge the potential risk that is involved in lending money to an individual. Knowing the areas that are impacted by credit scores can help you read a credit report.
1. Negotiation - When discussing the loan term with the lender, you are more likely to get things in your favour if you have a good credit score.
2. Loan Processing - A good credit score can facilitate the loan approval process and allow you to borrow money without much hassle.
3. Qualifying for Pre-Approved Loans - There are many financial institutions that offer pre-approved loans. But to qualify for it, you need to have a good credit history.
Each CIBIL score range comes with a rating provided to it, along with the significance of that range. Here is a table to help you know how to read your credit score.
Band: Below 300 Rating: Poor
Band: 300-550 Rating: Very Low
Band: 551-620 Rating: Low
Band: 621-700 Rating: Fair
Band: 701-749 Rating: Good
Band: 750-900 Rating: Excellent
If your score is below 300, it means you either do not have a credit history or have limited usage of credit. This can make it difficult for lenders to know your loan repayment trend and capacity. If your score lies within the range of 300 and 620, it suggests issues that you need to overcome in order to improve the score and increase your chances of obtaining loans.
A credit score between 621 and 700 would mean that you are paying attention to improving your score. But you will need to continue to improve the score further. A score between 701 and 749 would allow you to gain loan approvals without any hassle. A credit report guide showing a score above 750 would mean that you are the favourite of money lenders. You can not only qualify for loans easily but can also get them on terms that work best for you.
Read More: How Students with No Income Can Get a Credit Card
In order to read your credit report online, it is vital that you understand its four most important sections.
This section of the credit report is for personal information. It contains details like your name, gender, date of birth, your passport number, PAN details, voter ID details, and driver's license number. The data is either collected from various members or from money lenders. You will also find your employment details here that correspond to the time period when a particular credit account was opened. Paying attention to this segment can help you to obtain a proper credit report guide so that you can do better to improve your credit score.
This is considered to be the most critical section of the credit report. This segment contains information about your credit cards and all other loans. You will find the name of the lender here and details of the credit facility provided. It will also contain the name of the account holder, account type, date of opening, current balance, loan amount, and the date when the last payment was made. Your monthly payment details will also be recorded here for a period of 36 months. So, you must read a credit report.
As the name suggests, this section contains details of your current and past credit accounts. It will show the current balance on the account and the type of credit account it is. This means if you have multiple credit accounts, the details will be mentioned categorically, such as an installment account for car loans, a revolving account for credit cards, and so on. This is like a summary of your credit history with details of your accounts. With a credit report guide, you can manage this section better.
This section of the report contains information about the number of inquiries made into your account. Whenever you apply for any kind of loan, the lender may access your credit report to know your credit history. Each time any third party attempts to access your report, it gets recorded in this segment for a period of two years. This can give an impression to the lenders that you have made multiple loan applications in the last two years. This is why you need to obtain a credit report guide and be careful about how you want this section to appear to the potential money lenders.
Read More: How Credit Card Usage Makes or Breaks Your Credit Score?
If you frequently enquire about ”read my credit score”, here is a guide to help you understand the factors that contribute to the calculation of your CIBIL score.
1. Repayment History - 35% of your credit score depends on your repayment history. This means the better you are at paying back loans and settling debts, the better your repayment history will be. This in turn, can make an outstanding contribution to the improvement of your credit score. So, it is crucial for you to know how to read your credit score and make timely payments to avoid defaulting.
2. Credit Balance - This section contains information on the total balance of your credit facility and the amount that you have utilized so far. This information collectively adds 30% weightage to your credit score. If you can maintain a utilization and balance ratio of 30:70, you will be in a safe zone at the time of loan application. Hence, know how to read your credit score and use only 30% of the credit limit.
3. New Credit - Did you know that inquiring about credits can also affect your credit score? Well, it does! If you make multiple inquiries or applications for new credits (cards or loans), it can negatively impact the perception of lenders towards your profile. Also, this section contributes 15% to your credit score.
4. Credit Availing Period - This section will add 15% to your total score. It is best to opt for loans with a tenure that you are confident about. If you take loans for a longer duration and repay them successfully, you will be able to obtain a good score for yourself. This is why a credit report guide is essential.
5. Credit Mix - This section indicates the kind of loans you opt for and adds 10% to your credit score. It is crucial to have a credit report guide and maintain a portfolio that includes both unsecured and secured loans, along with credit duration of both short and long term.
Read More: https://zetapp.in/blog/what-is-the-use-of-cibil-score
There are many factors that can affect your credit score. Knowing them can help you gain a sound credit report guide and work towards maintaining a good score.
1. Debts - Your debts can play a significant role in bringing down your credit score and negatively impacting the report. The more unsettled your debts are, the higher the impact on your credit score will be.
2. Income - When you read a credit report, you will see that your income will not have a direct impact on the score. However, it will definitely affect your creditworthiness and will influence the way lenders approach your loan applications.
3. Repayment History - Falling behind on payments and defaulting can bring down your credit score. Negotiating on unpaid loans as a means of settling the debt can also have a negative impact on your score. This is why you must read a credit report diligently.
4. Application History - If you have had multiple loan applications that were rejected by the financial institutions, it will impact the way your credit score is perceived, and your applications are processed in the future.
5. Errors on Report - There might be errors on the credit report that you are not aware of or did not rectify. Such errors can also impact the credit report. This is why knowing how to read your credit score is necessary so that you can notice the errors.
Read More: Is 720 a Good CIBIL Score?
Since your credit report can affect you in various ways, you must know how to improve the score.
1. Paying back the bills on credit cards and EMI on time is extremely important to ensure a good credit score.
2. Not borrowing loans can also put down your credit score and impact your chances of getting approved for a loan in the future. To prevent this, opt for a small amount of personal loan and repay it on time. This will allow you to obtain a credit score.
3. If you had an application for a credit card or loan rejected, avoid reapplying unless they eat the considerable time gap. Also, if there are credit cards that are dormant or unused, ensure that you are cancelling them.
Maintaining a good credit score is necessary if you want to obtain loans easily and under the best possible conditions. While there are factors that can affect your credit score negatively, you can also work towards being a responsible borrower and maintain a good credit report guide if you know how to read your credit report online.
Read More: Top Factors that Affect Your CIBIL Score
What should be my credit score to qualify for loans?
A credit score of 700 and above will be ideal if you are seeking personal and business loans. A score of 650 and above will be effective for loan approval for home loans.
How do I read my credit score?
You can check your CIBIL score on their official website against a small payment. However, some financial institutions and websites allow you to read a credit report online for free.
What indicates a good CIBIL Score in India?
A score of 750 and above is considered to be a good credit score. It will allow you to obtain loans at favourable interest rates and conditions.
What is the fastest way to increase your CIBIL Score?
Repaying your existing debts and limiting your credit utilization are among the most effective and fastest ways that you can improve your credit score.
What is the full form of CIBIL?
The full form of CIBIL is Credit Information Bureau (India) Limited. It is one of the four companies in India that has been licensed by the RBI to maintain credit information.
How to read a credit report and improve it after debt settlements?
After you settle the debts on your credit card, you must read a credit report to see if the status has changed from settled to closed. Also, be conscious about your spending habits in the future so that you can keep improving your score.
Can opting for a credit card affect your credit score?
Opting for credit cards will not have any impact on your score unless you default on payments. Not paying dues on the cards can decrease your credit score and affect your creditworthiness.
Do personal loans impact credit score?
The interest rate on personal loans is higher as compared to other loans. This can make it difficult for you to repay on time. This, eventually, will contribute to the decrease in your credit score.
What is meant by credit repair and what is the cost of it?
Credit repair means improving your credit score in order to be eligible for loans. If you read a credit report and opt for ways of improving it on your own without any expert assistance, there will be no cost involved.
Can a high credit score guarantee loan approvals?
When you read a credit report and find a high score, it cannot guarantee loan approvals. This is because there are other factors involved like loan eligibility of the postal code of your address, your income to debt ratio, past debt settlement record, etc.
Download the app now
