20-Dec-2017 written by : FSI-Team
Believe it or not, your credit report is as important as your high school report, at least in the context of personal finance.
The majority of banks and NBFCs carefully review every loan applicant's credit score. Only after a report checks off every box in their list, they go forward to approving the loan that’s been requested.
Although the exact credit checklist may vary from one bank to another, the following are some of the most common things they take note of during the CIBIL score check:
The number of your existing loan accounts plays a big role in the approval of a personal loan, home loan, etc.
For instance, if you already have multiple loans, then it will be difficult for you to repay another loan, which is why a lender may decide to reject your loan application.
Most banks prefer customers who have no existing loan accounts at all or have only a single loan account. The same goes for credit cards.
So, if you have several credit credits which you use frequently, then it could reflect a credit-hungry behavior, something that raises the red flags for the lenders.
When a borrower is unable to repay a loan or simply chooses not to pay of their own accord, then they are called a defaulter.
If you have ever defaulted on a loan in the past, then the same will be mentioned in your credit report- something you should be really worried about. This is because lenders don't usually approve loans if they notice a mention of loan default in someone's credit report.
The stigma attached to defaulting is so bad, that even if you try to increase CIBIL score, you may not convince a lender to approve a loan or even a credit card. Thus, prevention of such an event is the best solution to the problem.
If you want to make a good impression on a lender, then it's important that you don't apply for the loan you want at the other banks at the same time. This is because every time you apply for a loan, the lender makes an inquiry to their credit rating agency to fetch your credit profile.
When you apply for a loan with multiple banks at the same time, it leads to multiple inquiries. These are mentioned in the credit report as well. So, when a bank notices the same, they may think you are unable to find a loan which is why you are trying your luck everywhere. This may compel them to turn down your credit request.
The repayment history forms an important part of every CIBIL Score check and CIBIL report check process and comprises of the loan EMIs and credit card bills you have paid in the past.
A lender checks whether you have paid all your bills and loan debt on time or you have made a few or more than a few late payments as well.
Naturally, you want your repayment history to be clean and devoid of any late payments if you want your loan to be approved.
There has been a rise in the number of identity thefts lately which is why most banks check for anomalies in the personal details and financial details in the credit reports.
If there are typos in your name, address, etc. or transactions that raise suspicion, then the lender may reject your loan application as well. However, you can avoid this problem and potentially increase CIBIL score as well by developing a habit of reviewing your credit report every once in a while and identify discrepancies, if there are any.
The actual process of reviewing every loan application is actually somewhat more elaborate than the points given above. However, they do sit at the core of the entire process and hold a high importance. So, be sure to check for these before you apply for a loan yourself.