27-Aug-2016 written by : FSI-Team
If you are conscientious financially, you already know by now that it is very important to keep a close watch on your CIBIL score as lenders will compulsorily look at it while assessing your credit worthiness. But even if you do request for your CIBIL report, you may stumble upon things that you may not understand. Just to help you better assess your credit health, here are six useful things that you should look out for in your CIBIL report. In India one does not have access to a free CIBIL report yet, so do ensure you do not miss out on these important details when you access your report at least twice annually.
The first thing you obviously look for in your CIBIL report is your CIBIL score. It is a three digit numeric that is indicative of your credit health. Anything above the score of 750 is considered good, so if your score if below that level, you are obviously faltering somewhere and your next step should be to find out where you are going wrong.
So long as you are servicing a credit line, the lender is responsible for passing on details about your credit handling to CIBIL and the other credit bureaus. But understandably in our country like ours where the amount of data pertaining to each individual runs into humongous amounts, errors are not uncommon. Therefore, the next thing that you do is comb through your report meticulously to check whether the information about the loan or the credit card you are servicing is accurate.
For instance, you may have closed a loan a while back, but the information about the same has not been updated from the lender's end at CIBIL. To spot such errors you need to read through your CIBIL report carefully. Also check if the other relevant details such as personal information, address and identity proofs are accurate. In case of any error raise a dispute immediately.
Sometimes your credit score can take a beating even if you have done everything right. This ca be due to a case of a duplicate or a stolen identity. You should therefore check if there are any details credit cards or loan accounts that you have not initiated, inquiries that you have not made or there are other defaults or delinquencies that are certainly not your doing. If you come across any such discrepancy,not only should you raise a dispute with the credit bureau immediately, you should also notify the relevant lender urgently before you incur a financial loss.
Timing of your repayments is the most important factor that has a bearing on your CIBIL score. Check for your credit repayment information and see if you have made repayments 30, 60, 90 or 120 days late. The later you pay, the greater the damage is on your CIBIL score. However, the good news is that if you start making timely repayments after you realise the drag on your CIBIL report, it will get rectified with time and you can bounce back with a better credit score.
While you may know in theory that credit utilisation is one of the factors that influence your credit score, you may not know what goes into the algorithm that is used to assess credit utilisation. While assessing your utilisation, the credit bureau looks at two things- the revolving credit and debt to credit ratio.
Let's understand this with an example for each:
Revolving credit- Your credit limit on your credit card is ₹50,000 and your outstanding balance is ₹10,000. This means your credit utilisation is 20%
Debt to credit ratio- Say you have four credit cards each with a limit of ₹50,000 (total amount ₹ 2 lakhs). You have an outstanding balance of ₹10,000 on two of these cards and no outstanding on the others. Your total credit utilisation is therefore 10%.
In order to keep your credit score high, you should not allow your credit utilisation to exceed 30% of your total credit limit.
People often forget to check if the information about closed accounts is showing up in the CIBIL report. While ideally it is advisable not to close credit card accounts because the age of the credit is also an important factor that plays a role in the assessment of your credit score, you may want to close a store credit card if you no longer live in the area that you were earlier in, or you want to close a card that you had handed over to a working daughter when she was still in her student phase and no longer finds use for it. When you pull out your CIBIL report the next time, ensure that these accounts show up as closed in your CIBIL report. If not, it is time to check with the concerned lender and rectify the error immediately.
As you can see it is important to be able to read your credit report aptly in order to be completely sure that your report remains error free. Keeping this checklist handy while accessing your CIBIL report the next time round, will ensure the same.