Imagine a friend who is interested in borrowing your car. Before giving your beloved car, you will ask him/her a few questions. Has S/he borrowed anything else from you before or from someone else? If so, how did they use it? Responsibly and returned it on time or didn’t handle it with care? These are just a few questions you as an individual will consider asking to make sure nothing happens with your car.
Similarly, when you apply for a loan, lenders may have similar questions about you and to get all the answers, they may check your credit reports to find the answer. If you don’t know how to read cibil report or don’t know what you should check, this blog is for you. Here we are going to explain what a credit report is and what to check in a credit report in order to understand what lenders see when you apply for a loan.
For the unversed, what is a cibil or credit report?
Many people have heard what is credit report, or cibil report is as it is known colloquially, but don’t have a complete idea what a credit report is. It is a complete statement that includes your active and closed credit accounts, when did you open the credit, the type of credit you have taken, and recent inquiries for each account. The bottom line, each credit report provides information about your financial habits.
The bank you are going to take a loan from will use credit reports in addition to other factors to determine whether you are eligible for a line of credit or not. Your credit report will help them decide when you are likely to repay the debt. Due to this particular reason, it makes your credit reports critical for decisions for a bank about whether to lend you money or not.
To be able to understand how to read cibil report, let’s understand the key sections of your credit report.
- Reference Number: One of the most important numbers you should keep handy. The CIBIL report calls it control number, Experian calls it report number and the Equifax report it is the order number. One must understand that this number is unique for the credit report generated. All the future queries one may have will have proceeded after you quote this number to the bureau.
- Account Summary: This provides a list of each of your loan accounts. The overall number of accounts, the number of past-due accounts, and the number of accounts with no balance are the three most crucial factors to pay attention to. Account summaries are available on both the Cibil report and Equifax credit reports. For the unversed, accounts with zero balances are ones for which your dues have already been paid. After knowing how to read cibil report, you will be able to see the number of closed accounts disclosed in the credit report. A few loose ends need to be tied by formally closing the paid-off accounts if the number of accounts with zero balances does not equal the number of accounts that have been closed. Just remember that the loan is not closed simply by paying the last EMI.
- Consumer Information: Your name, date of birth, gender, phone and contact numbers, addresses, and Permanent Account Number are all included in this portion of your credit as well as in cibil report. The data presented in this part is essentially the same for all three reports. Remember to check that the dates and spellings are accurate and that your address has been changed. This part often includes both your current and previous addresses.
- Account Details: This information includes numerous account-related details of your account, such as which type of loan account you may have, the date it was opened, whether you are the guarantor on a loan account, and whether it is a joint or individual account. The payment history is the most crucial of the several details stated here. The important thing to note here is to verify the account’s status; it can be active, paid off, or written off. If you have a dispute on an account, it should be mentioned as a disputed account. Whenever there is a discrepancy, contact your bank.
- Enquires: The inquiries that various lenders have made on your account are displayed in this area of the Equifax credit report and Cibil report. It provides information on each inquiry as well as the overall number of inquiries. It contains all relevant information, including the name of the institution that inquired as well as the date, reason, and amount of the inquiry. This particular section has been requesting your credit report. Keep in mind that without your permission, no lender may request to check your credit record. Typically, your loan application form includes your authorization to have your credit record looked at. In case you haven’t applied for a loan and the report shows that a lender has made an enquiry, chances are very high that you have been exposed to identity theft. Immediately get in touch with your bank and submit your complaint.
There are two different types of CIBIL credit reports: Company Credit Report and the Credit Information Report. In the credit information report, a credit information report is created for each individual and includes information about previous credit behaviour as well as a CIBIL score that was calculated statistically. In another report that is in CIBIL Corporate Credit Report, CIBIL company credit report compiles information from several credit institutions and includes a company’s credit payment history. A firm credit report’s goal is to assist lending institutions in making rapid and accurate credit judgments.
So, we are saying,
Just like your medical report tells you how healthy you are, your credit report shows your financial health and creditworthiness. In India, you can get your credit report from three agencies- Credit Information Bureau or CIBIL as it is called, Equifax Credit Information Services, and Experian Credit information. While one bank may subscribe to CIBIL, another might do so to Experian, and the third bank might subscribe to Equifax.
As much as these credit reports give information about your financial health, credit history can also affect the interest rates you will be offered by the bank. Thus, it is imperative to know how to read cibil report so that it can give you an idea of how to make sense of your credit or CIBIL report.