Maintained by a credit bureau, a credit bureau report is a month on month record of your loan related EMI payments (personal loans, home loans, automobile loans, and overdraft facilities), credit card bill payments etc. And the number of times you or a bank or a credit card provider has requested for a credit bureau report (usually when you have applied for a loan or credit card). The report does not include your investment or savings details. Along with this the report also includes your personal information such as your name, date of birth, residential address, PAN, passport number, voter ID number, contact number, type of credit availed, size of the loan or credit limit, outstanding current balance, any overdue amount, number of days the payment is overdue and its status.
The report plays a key role in the bank’s decision when you apply for a personal loan. It contains details about your credit history and repayment history. Banks submit monthly reports of their customer to credit bureaus who then generate reports for enquiry requesting banks or individuals. The bureaus consolidate your borrowings and credit history sources from different financial institutions including banks, NBFCs and digital lending platforms into a credit bureau report. Some prominent credit bureaus in India are CIBIL, Equifax and Experian.
The credit bureau score is a 3-digit numeric summary of your credit history. The score is calculated using the information from the credit bureau report. The score ranges from 300 to 900. The higher the score the more, the higher your chances to get a loan approved.
Your credit score provides an indication of the probability of default based on your credit history; and how likely you are to pay back the loan should you get a loan approved. As your credit bureau report plays a huge role in your chances of availing credit, it is important that you understand what information is shared by banks and lenders with credit bureaus. Understanding your credit bureau report enables you to take control of your finances with regards to savings, budget, credit limit usage and EMI payments.
1. What can affect your credit bureau score?
Late payments or defaults
Your repayment history has a significant impact on your credit bureau score. If you have regularly missed payments on any of your existing loans your credit bureau score is likely to be negatively affected since it indicates your trouble in servicing your loan obligations.
Multiple loan enquiries
If you have tried to apply for a loan at multiple banks or institutions during the same period of time, then this indicates ‘credit hungry’ behavior, which banks look at negatively.
High utilization of credit limit
Spending over the credit limit and increasing your outstanding balance shows signs of repayment burden and hence indicate unwise spending routine.
2. How to ensure a positive credit bureau report
- Always pay your bills on time
- Keep your credit card balances low
- Maintain a healthy mix of credit (a combination of credit cards, personal loan, and home loan)
- Keep some buffer time between closing credit card accounts
- If you are a co-applicant or loan guarantor, keep an eye on the repayment towards the loan
- Try not to apply for a loan multiple times during a short span of time
- Review your credit history frequently throughout the year and look for any errors.
3. How do errors crop up in a credit bureau report
- Current balance – The bureau may not record the latest installment that you made or use an inaccurate overdue credit card balance. In case you have cleared off a personal loan around a week ago, there is a chance that might not be updated by the bureau.
- Personal details – Check for incorrect personal details such as incorrect name, address, date of birth or PAN..
- Duplicity – Look for multiple accounts registered in your name on the report.
4. Avoid errors in your report
You won’t know about any error unless you apply for a credit bureau report yourself. We tend to undermine the importance of a credit report until we hit a roadblock in the loan application process. In case you find any error, you need to ‘initiate a dispute’ at the bureau’s website. Once the bureau receives your dispute claim, they will investigate the matter. It could take time to get a response from the bureau because the bureau has to wait for the information coming from the bank or lending institution. This can take approximately 30 working days.
In case the bank or lending institution has supplied incorrect data to the bureau with regards to loan or credit card details, then you should contact the bank and report the discrepancy. The bank will then have to contact the bureau and rectify the earlier information. This can take approximately 45 working days.
In case of a mistaken identity for a loan or card amount not availed by you, contact the credit bureau who in turn will contact the bank or lending institution and revert to you once the error is rectified. This can take approximately 30 working days. In case the bank finds the profile of the person your identity has been mismatched with, it could take more time to get the mistake rectified because the bank has to then contact the other individual to get the mistaken identity cleared.
Your credit bureau score is very important when it comes to availing a loan from banks or digital lending platforms. It is therefore your responsibility to ensure that an error prone report does not hamper your loan approval chances.