If this is the first time that you are reading your credit report, the probability of it being an information overload is overwhelmingly high. Additionally, if you have a long list of loan accounts and/or credit cards over a period of time, the task can be daunting. Understanding the positives and negatives and how the credit report is important to your financial well-being is vital. 

What is a Credit Report?

Simply put, a credit report is a history of how you have managed your credit in the past and what you are currently doing with it. In other words, it is a document that outlines your borrowing as well as repayment history.

The credit score calculation that appears as part of the credit report is a mathematical representation of your creditworthiness to a prospective lender. This information is key as it helps in their decision making process whether to extend any credit to you as a borrower, what interest rates to charge and if you need to put up collateral at all.

There are 4 major credit bureaus in India - TransUnion Credit Information Bureau (India) Limited or CIBIL, Experian, CRIF Highmark, and Equifax that maintains credit reports for all consumers based primarily on information reported by lending institutions. Individuals can access their platforms online to check their credit score.

What Information is Included in your Credit Report?

Every credit bureau has their individual method of creating a credit report. That said, the report is usually divided into these following sections:

  1. Personal Information: This includes the name or names that you may have used in connection to your financial accounts, your date of birth and address/es (including email address).
  2. Credit Information: This includes information on your present and previous credit accounts such as loans, mortgages, credit cards, payment history, account balances and the duration of each account being active or open.
  3. Debt Information: The credit report also lists any debt accounts that are overdue and have been transferred to an external agency for payment collection by the lender
  4. Public Information: Any foreclosures, bankruptcies, liens or civil suits arising out of it will be listed in this section
  5. Enquiry Information: When lenders or credit card companies make any recent enquiries on your credit history, the enquiry information will be listed as part of the credit report.

Why is Your Credit Report Important For you?

The objective measures of your financial reliability, or creditworthiness, can be found on your credit report. Taking into consideration a number of factors, the credit report highlights a numerical value known as the credit score. History of defaults on loans or overdue payments on credit cards, delayed payments, a high debt-to-income ratio, etc. will result in a low credit score. On the other hand, if you have a track record of paying your bills on time, repaying loans within its tenure, no history of overdue payments or default, and a low debt-to-income ratio, you can expect your credit score to be on the higher end.

Having a positive credit score can open the doorway to new opportunities.

  1. A good credit report and score impacts your overall borrowing ability. When you apply for a loan or a credit card, the likelihood of your request being approved is high since your creditworthiness proves that you are a low financial risk.
  2. Lenders may offer you preferential rates of interest when you have a credit score of 750 or above. You may also qualify for pre-approved loan offers, a higher limit on your credit cards and better terms on credit products.
  3. Other than financial benefits, a credit report with a high credit score helps in apartment rentals. This is because property managers or landlords may consider you a financially responsible individual who is very less likely to miss out on rent payments in comparison to anyone who has a history of defaults which may be grounds for rejecting their rental application.
  4. Regularly checking your credit score and report helps you spot credit fraud. You can take up any instance of fraud on your account with the respective financial institution.

How to Improve your Credit Score?

You can improve your credit score in these simple ways. 

  • Set reminders for paying your bills on time
  • Target a 30% or less credit utilisation / debt-to-income ratio
  • Minimise new credit requests
  • Maintain old credit cards to lengthen credit history
  • Customise your credit limit
  • Opt for long tenure loans
  • Deal with any delinquencies 
  • Avoid taking on new debt until existing ones are paid off 

Check your credit report here free of cost today! Depending on your credit score, you can avail exciting offers on Fullerton India personal loans. Apply online today to know more.

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