FAQs - Consumer Credit Report
The ‘Accounts’ section of your credit report contains existing and past credit facilities that you have availed from various loan providers. For example, if you have a home loan and a personal loan, your credit report will reflect both accounts on your credit report along with details such as the name of the lender, type of credit facility, dates of opening and closing (if applicable) of each account, current balances, status of the accounts and your payment history. Your credit report summarizes your credit behavior across these accounts for the last 36 months.
The ‘Enquiry’ section of your credit report will be populated when a lender accesses your credit report from CIBIL in order to evaluate your loan application. If you have applied for a home loan of Rs. 10,00,000 then the ‘Enquiry’ section of the credit report will be populated to show the name of the lender you applied to, along with the enquiry date (date on which the lender has accessed your credit report, enquiry purpose (in this case it was a home loan) and the enquiry amount (which would be for Rs. 10,00,000 in this case). All enquiries made by lenders in the past are displayed here.
There is a critical distinction between an Account and an Enquiry in that the former denotes actual loan obligations that you currently are bearing while the latter denotes that you had applied for a loan or other credit facility from various lenders. Given that open accounts have an impact on your ability to repay additional debt obligations, having many open accounts may result in your loan application being viewed negatively by a lender. This need not necessarily be the case if you have many enquiries on your credit report.
‘High Credit’ in the accounts section of your credit report is only displayed with credit card and overdraft accounts. It denotes the highest credit utilized in a single month over the life of that credit card. For example, 2 years ago I spent Rs. 75,000 on some emergency medical treatment on my credit card (which has a credit limit of Rs. 1,00,000). Given, that was the single highest monthly balance in the history of my credit card usage, this is what gets reflected in my credit report.
‘Sanctioned Amount’ is displayed along with credit facilities other than credit card and overdraft accounts. The Sanctioned Amount field denotes the amount disbursed to you.
The “Date Reported” on your credit report indicates the date on which that information was reported to CIBIL. Sometimes if a lender has stopped reporting information (say on a closed account), the date reported could be a year or more old. If your date reported on open accounts is not within the last 3 months of the date of the credit report you should raise a Dispute Resolution request.
Given that a CIBIL credit report helps a loan provider ascertain your ability to pay additional debt based on your past performance, a ‘’written off’ or ‘’settled’’ account implies that you have not been able to pay your past dues. Hence, Loan providers may view accounts that are reported as ‘’written off’ or ‘’settled’’ negatively and this may affect your chances of a loan approval.
If you find a date adjacent to the ‘Closed’ field in the account section of your CIBIL credit report, this means that that loan account has been closed by the loan provider. In other words, it means you have paid off your loan. However, if you have not been able to pay off your dues in full, your account could still be marked ‘Closed’. In such cases, you may see the ‘Status’ section populated (Written-off or Settled), which is viewed negatively by loan providers.
If no date is populated in the ‘Closed’ field, it implies that your account is still open. This can be harmful to your loan application, if you have taken many loans over the years. Now, why is this harmful? Well, if many loan accounts are perceived to be open, the loan provider is likely to think that you already have large monthly outflows in terms of EMIs. This can negatively impact your loan application. Hence, if you see open accounts on your credit report that are actually closed, raise a Dispute Resolution request.
The Ownership indicator tells the Loan provider who is responsible for payments on that credit facility. There are 4 types of indicators that can appear on your CIBIL credit report:
1. Single: You are solely responsible for making payments on the account.
2. Joint: You and someone else bear joint responsibility for payments on these accounts. It is important to check your credit report periodically, because late dues on a Joint account are likely to affect your loan application, even if you are not the one paying off the loan.
3. Authorized User: This is used for add-on credit cards. It implies that you have an access to credit, but are not responsible for paying dues on that particular account.
4. Guarantor: A guarantor pledges to repay a loan on behalf of a third party who has taken a loan. Hence, he provides a guarantee to the loan provider, that he will honour the obligation, in case the principal applicant is unable to do so.
DPD or Days Past Due appears in the Account(s) section of your CIBIL credit report. Here, it resides with one other piece of information - the month and year of payment. The DPD indicates how many days a payment on that account is late that month. Anything other than “000” is considered negative by a Loan provider. Up to 36 months of this payment history (with the most recent month displayed first) are provided in this section. For example, if you have taken a loan whose payments started in Aug 2010 and are 3 months late on a payment due at the end of Sept 2010, your DPD may be reflected as follows:
DPD 090 060 030 000 000
Month/Year 12-10 11-10 10-10 09-10 08-10
Given that your credit history helps a Loan provider ascertain your ability to pay additional debt based on your past performance, having DPD other than “000” on your CIBIL credit report would imply that you have not met your financial obligations in the past. Hence, Loan providers may view accounts that are reported with DPD as anything other than “000” negatively and this may affect your chances of a loan approval.
It is important to note that some Loan providers report DPD as follows:
Payments are being made within 90 days. Any account overdue by more than 90 days is classified a Non-Performing Asset (NPA) by lenders
An account which has remained an NPA for up to 12 months
The account has remained a Sub-Standard account for a period of 12 months
An account where loss has been identified and remains uncollectible
Any classification other than “STD” is viewed negatively by Loan providers during the loan application process.
On occasion you may see “XXX” reported for your DPD on a certain account. This means that the Loan provider has not reported that month’s DPD to CIBIL and hence, there’s no need to worry.
The best way to avoid having anything other than DPD of “000” or “STD” on your CIBIL CREDIT REPORT is, to always pay on time and the best way to always pay on time, is to avoid more debt than you can comfortably handle with your current income.
The best way to avoid this from happening is to always pay your bills on time and avoid taking on excessive debt. Just so that you are always able to honor your loan obligations.
However, there is a situation where you may face some difficulty.
Over the years, some of us may have built a collection of credit cards from various Loan providers. Some of us have used these, while others may have stored the credit cards in a file or drawer at home for future use and completely forgotten about them. Having too many credit cards makes us unable to track the various Terms & Conditions that we have agreed to, during the application process. Some of the credit cards bear no annual fee in the first year. However, in the second year, annual fee is charged to the credit card. You may have forgotten about the credit card, but the fee and interest keeps accruing to your account and you only find out about it when your loan application is rejected. This happens because eventually, the loan provider has to write off the amount and report it to CIBIL. You then have to take it up with the loan provider and CIBIL which unnecessarily holds up your loan application.
So, how do you avoid this? If you have any sort of credit facility, you must keep track of your credit profile by reviewing your credit report 2-3 times each year. This will ensure that you detect and resolve any credit related problems well in advance.
Enquiries are usually made on your credit history when you apply to a lender for a loan. The lender accesses your CREDIT REPORT to assess your repayment capability. When you see Enquiries that you have not made it means one of 2 things:
1. The lender is making an Enquiry to review your overall financial health
2. Someone with access to your personal information may have approached a lender in order to apply for a loan. This is worrisome because the lender could believe that the applicant is genuine (even though this may not be the case) and may proceed to sanction the loan.
In the event that a loan is sanctioned by a lender the account will appear on your credit report within 45 days.
The first thing you should do when you see Enquiries that you have not made is to check your credit report for loan accounts that do not belong to you. If you do find discrepancies, immediately raise a ‘Dispute Request’ by visiting the ‘Dispute Resolution’ page on the credit bureau’s website.
If you are informed by CIBIL that the loan provider has rejected your Dispute Request you should report the erroneous account to the relevant loan provider immediately so that the it is alerted to the identity theft case. This will prevent the situation from recurring.
Identity theft occurs when someone uses your personal information to apply for a loan or credit card. If this application is successful the individual has access to finance that you are liable for. The individual who has stolen your identity will probably not pay back the misappropriated funds. Hence, the lender will update your Credit Information Report (CIR) to say that you have defaulted on a loan. Unfortunately, in the event that your identity is stolen, you will be unaware that this has occurred. You will most likely only discover this when you apply for a loan and your loan application is rejected.
The easiest way to prevent Identity Theft is to regularly monitor your credit history. Purchase your CIR 3-4 times a year and ensure that your credit history accurately reflects your credit usage and activity. If you see Enquiries (loan applications) that you have not made, immediately.
Understanding The Loan Evaluation Criteria
CREDIT REPORTs have been widely used by loan providers to evaluate loan applications for over 5 years. However, only recently have people begun to realize, how crucial it is to be aware of and maintain their credit history. Understanding the CIBIL credit report helps you identify the right time in your financial life cycle to apply for a loan and increase your chances of a loan approval. Listed below are the most important attributes looked at by a Loan provider while evaluating your credit application.
Attribute 1: Payment History
This appears in the Account(s) section of your CIBIL credit report. There are 2 parts to this information: the Days Past Due (DPD), and the month and year of payment that reside here. The DPD indicates how many days the payment is late that month. Anything other than “000” is considered negative by a Loan provider. Up to 36 months of this payment history (with the most recent month displayed first) are provided in this section.
Attribute 2: Current Balances
Also appearing in the Account(s) section of your credit report, the current balances on various loans indicate the depth of your debt. The sum of your current balances helps a Loan provider determine your strength to take on additional EMIs, in relation to your current income. Naturally, lower the current balance, the better the chance of your loan getting approved.
Attribute 3: New Credit Facilities
If a loan provider observes that you have recently been sanctioned a number of new credit facilities, it would mean that your monthly outflow in terms of EMIs, are likely to have increased. Hence, it may have a negative impact on your loan application.
Attribute 4: A number of new Enquiries
If you have applied for a number of loans in the recent past, the chances of your loan getting approved are likely to suffer. Simply because, this credit behaviour indicates that you are “Credit Hungry” and in an urgent need of money. It is likely to make Loan providers more cautious while evaluating your credit application.
If you are planning to apply for any sort of credit facility for a purchase (home or car) in the near future, it is imperative to check your CIBIL credit report 2-3 times each year and ensure that your ‘Reputational Collateral’ is reflected accurately. This will provide you with access to credit faster and at better terms. Rest assured; that Enquiries are not added to your CIBIL credit report when you purchase one directly from a CIBIL.
Managing Your Credit History
Your credit history, other than your income, is the single most important tool used by a Loan provider to evaluate your application for any loan or credit card application. Naturally, it’s important that you understand your Credit Information Report (CREDIT REPORT) and what it takes to maintain a credit history, so that is viewed favourably by Loan providers. A good credit history can be maintained by following these 7 simple rules:
- Rule 1: Always pay your bills on time. Late payments are viewed negatively by Loan providers and may affect the chances of your loan getting approved.
- Rule 2: Keep your balances low. While the balances on your loans will only reduce over time as payments are made, you must be diligent about making timely payments on your credit cards. Also, you should control your utilization. For example, if you have used Rs. 90,000 out of a credit limit of Rs. 1,00,000, this may be viewed negatively by a Loan provider. It’s always prudent to not use too much credit.
- Rule 3: Maintain a healthy mix of credit. Your credit history should contain a mix of a home loan, auto loan and a couple of credit cards. A high number of just credit cards may affect the chances of a loan approval. Why is it so, you may wonder. Although a credit card offers easy access to finance, it’s also by far the most expensive form of credit. More the number of credit cards with high utilization, larger are the payments resulting from its high rate of interest.
- Rule 4: Apply for new credit in moderation. If you have made many applications for loans, or have recently been sanctioned new credit facilities, a Loan provider is likely to view your application with caution. This ‘Credit Hungry’ behaviour indicates your debt burden is likely to, or has increased and you are less capable of honouring any additional debt.
- Rule 5: Think twice before closing credit card accounts. While, using credit cards may negatively impact your credit history, unused credit cards actually imply that you are financially secure. This makes Loan providers view your application more favourably.
- Rule 6: Monitor your co-signed and joint accounts monthly. In co-signed or jointly held accounts, you are held equally liable for missed payments. This is extremely important because your joint holder’s negligence could affect your ability to access credit when you need it.
- Rule 7: Review your credit history frequently throughout the year. Unpleasant surprises in the form of rejected loan applications can be avoided by ensuring that your CREDIT REPORT accurately reflects your current financial status. So reviewing your credit history 3-4 times each year is imperative.
Though these general rules are important to keep in mind, each loan provider has its own policies to sanction a loan to an applicant.
It is important to note that your CIBIL TransUnion Score will begin to rise as you improve your credit history