23-May-2018 written by : FSI-Team
As per a survey that was conducted by Credit Sudhaar, the majority of the sample size (53%) were not about credit scores and only 15% knew what their score was. Thus it is expected that there is a lot of confusion and doubt that surrounds credit score, its calculation and its relevance for an individual
This is definitely a very important question, as to be credit healthy one must be aware of what impacts credit health. Five factors are considered for CIBIL score calculation, the diagram alongside depicts these factors and their weightage in score calculation. So repayment records of all your loans, credit cards, how much of your credit limit you use, how old is your debt, what is the mix of secured and unsecured loans and also the hard enquiries made about your score impact the final credit rating.
Now we know how the score is calculated but why is it important for us. 70% of the surveyed population knew that a good rating can help them in getting their loan application approved. The most obvious and commonly known use of the scores is when you apply for a loan, a good rating ensures that your loan application goes to the next level of scrutiny else it is rejected at the initial stage. A good score also helps the applicant in getting a good deal on loan interest rates. In some instances a healthy credit score may be crucial for getting a job too. Though this is still not very common in our country but the trend is catching on. Apart from all this your credit report lets you assess your credit health also.
Yes, you should and you should do so regularly. Hard enquiries impact the credit score negatively. When a prospective lender asks for your credit score it is reported in your CIR and too many hard enquiries lower the credit rating. However if you check your report yourself then it is called a soft enquiry and does not have any negative impact on your credit rating. On the contrary it is recommended that you check your credit score from time to time so that you are aware of your credit health and can take necessary steps (if required) to improve it.
No, there are four rating agencies in India. While CIBIL is the oldest one and has become almost synonymous with credit rating in India but there are three other agencies apart from CIBIL that provide credit rating to individuals in India. The four credit rating agencies in the country are CIBIL, Crif High Mark, Equifax and Experian. There may be a little variation in the scoring patterns of these agencies, so the scores may vary a little but the basics of rating remain same so the variation between scores is not likely to be very drastic.
Credit reports have details about all your credit cards and loans. So the next thing that comes to mind is how long does an information stay on your report. It varies depending on the type of information. Repayment history for past 36 months is included in the report, hard enquiries made in the past 24 months are factored in when calculating the score but a settled account stays on the report for seven years. Recent information impacts the score calculation more but details about all your loans and credit cards whether current are closed are mentioned in the CIR.