How to Read Your Credit Report

When it comes to loan applications or any form of credit, banks look for one important factor which is the creditworthiness of the borrower. The better the credit report of the person, the higher are their chances of availing a loan or other forms of credit like a credit card.

In India, the concept of the credit score to assess this creditworthiness was introduced in the year 2000. Banks contact licensed credit information companies, primarily the Credit Information Bureau India Limited or CIBIL, to get an insight into the credit history of an individual.

Therefore, it is crucial for anyone who is looking at availing any credit to be able to understand how to read the credit report. This allows you to make necessary changes in your financial habits and management to improve your CIBIL score and consequently, improve creditworthiness.

What is a Credit Report?

Based on the loans, credit cards, and other credit activities of an individual, a detailed credit report is prepared by credit information companies. In India, there are four such organisations, namely CIBIL, Equifax, Experian, and CRIF High Mark. However, most banks contact CIBIL in order to get a detailed credit report of the individual.

CIBIL collects all the information about the repayments made towards loans, the existing loans and credits, the number of loans applied for and the employment status of the individual to prepare a credit report. This information is obtained from banks and other financial institutions. This report contains details of all the credit that a person has availed including home loans, personal loans, auto loans and credit cards.

What is CIBIL Score?

Based on the credit report, each individual is given a three-digit CIBIL score. This score ranges from 300 to 900. The higher the CIBIL score, the more creditworthy the individual is.

The closer the score is towards 900, the better the creditworthiness. In case of individuals who do not have any loans or credit history, the CIBIL score will read NH or NA. This means that there isn't enough credit information available for the individual to create a credit report and give a credit score.

For most loans and credit cards, it is mandatory to have a credit score of 750 and above in order to be eligible for any additional credit. Having no credit history or having a NA or NH remark on the credit report is also considered a risk in most banking institutions today. Therefore, in order to make sure that you are credit worthy, good financial management is extremely important.

How to Read Your Credit Report?

Keeping a constant check on your credit report is extremely important. There are two main advantages of this. First, you will be able to make necessary amends in your credit activities. Second, you will be able to check for any mistakes in your credit report that need to be rectified in order to improve your credit score.

Every individual can get a free annual credit report. If you want multiple reports in a single year, it is possible to subscribe to various unlimited access plans available on www.cibil.com

There is a lot of information that is packed into your credit report. Understanding each one in detail is the key to being able to read your credit report. The information that is usually found in the credit report is as follows:

CIBIL Score

The first thing that you will see in the credit report is the CIBIL score. This is in the form of a number with a round indicator around it. If the number and the indicator are green in colour, it means that you have a good credit score. Yellow colour indicates that the score is average. Red indicates a poor credit score.

As mentioned above, the credit score will range between 300 and 900. This score is calculated based on the "Accounts" and "Enquiry" section of your credit report. In some cases, the CIBIL score is marked as NH or NA. This can mean a few different things:

  • It shows that you do not have any credit history or the information available is not enough for you to get a score.
  • There has been no credit activity for several years
  • You make use of add-on cards which are not reflected as part of your credit information

Personal Information

The second section in the CIBIL report is the personal information. This contains details of the individual such as the Name, Gender, and Date of Birth as per the information provided to CIBIL. It also contains details of different ID proofs of the individual such as the passport number, the driver's license number, Voters ID number, and PAN.

Contact Information

The mobile number, landline number, address, and the email IDs of the individual are recorded in this category. In case of the address category, you will also be able to see a classification of the address as residential address, office address, permanent address, and temporary address. Up to 4 addresses of each individual can be mentioned in this section.

Employment Information

Here you have the details of the individual's occupation as well as income. This is based on the information provided at the time of opening the account.

Account Information

This gives all the details of the loan or credit accounts of the individual. It also has details of the lender and the type of credit facility availed. Other details provided in this section are if the loan is individual or joint, the date of opening the account, details of last payment made, current overdue and outstanding if any. This is a month on month record which is noted over 36 months of making repayments.

Any red box above the details of an account shows that the account is either closed or is under dispute. This is removed after the dispute is settled.

Enquiry Information

Whenever you apply for a credit card or a loan, an enquiry is added to the credit report. It includes details of the type of loan and the loan amount that you have applied for as well.

Understanding Various Keywords

Here are some keywords related to the CIBIL report that you should know the meaning of:

The Keyword Used Meaning of the Keyword

Asset Classification of AC

As per the RBI Guidelines, banks are supposed to provide a DPD or Daus Past Due as follows:

  • Standard or STD: This means that repayments are made within 90 days
  • Special Mention Account or SMA: This is to denote that the standard account is moving towards sun-standard
  • Sub Standard or SUB: This denotes an account that has been an NPA or Non Performing Account for up to 1 year
  • Doubtful or DBT: This is when the account has been classified as SUB for more than a year
  • LSS: This is when a loss has been noted in the account

Actual Payment Amount

When the amount paid towards your credit is different from the actual EMI or repayment amount

Amount Overdue

This shows that the total amount required is not paid to the lender on time

Cash Limit

This is applicable only to credit cards. This is the amount of cash that the individual can withdraw using the credit card

Control Number

This is the number of the report and is crucial when an individual wishes to raise a dispute

Collateral

This indicates any asset that is pledged against a loan

Credit Limit

This is applicable to any Overdraft facility or credit card. This shows the total credit that the individual can avail

Current Balance

This shows the amount that an individual still owes to any lender. Usually, after repayments are made, the information is provided to CIBIL in 30-45 days

EMI Amount

This is the EMI to be paid towards each loan

High Credit

This indicates the highest amount used on a credit card or drawn from an OD facility

Repayment Tenure

This denotes the time frame within which the loan should be repaid

Ownership

This indicates if it is an individual or joint loan account and if the individual is the authorised user or add-on card user of any credit card

Sanctioned amount

The amount provided to you by the lender

Settlement amount

In case of any dispute on a loan account, the individual and the lender usually settle on an amount that he or she must pay.

Suit Filed or Wilful Default

This is when the lender has filed a suit against the borrower

Written off amount (Principal)

This shows the principal amount that has been written off by the lender

Written off amount (Total)

This shows the total amount written off including the principal and the interest 

Written off and settled status

This section contains a lot of information depending upon whether the loan has been restructured to give you different terms or if any amount has been written off, or if the lender and the borrower have arrived at a settlement

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