It’s been close to 2 months now, that we have reiterated the importance of building a good credit bureau report. We have rejected countless personal loan applications, simply because their credit report indicated non-credit worthiness. You need to understand, as a borrower, that a personal loan is an unsecured type of credit. You do not need to provide an asset as collateral. But, it is your credit bureau report that decides if you should get the approval or not. That’s how important your credit bureau report is. Along with a good credit bureau score, you also need to look at the credit bureau remarks. First, let’s look at what is a credit bureau, and why the credit bureau report is so crucial in getting your personal loan approved.
What is a Credit Bureau?
A credit bureau is an organization/agency that collects and compiles an individual’s credit information. Digital lending platforms (like Loan Singh), banks, credit card companies, government and debt collection agencies, send credit related information of individuals to the credit bureau. India’s most prominent credit bureau is CIBIL. Some other credit bureaus are CRIF High Mark, Equifax and Experian. Credit bureaus look at your credit repayment patterns, to determine how much risk you pose to the credit providing institution.
Credit bureaus do not interfere in the personal loan process. These, in no way can influence or tamper with your credit history. These are simply a mean to help credit institutions to mitigate the risk of credit default. Credit bureaus do this by using your credit information to compute a numeric score, called as a Credit bureau score. The score, along with your repayment history, is presented on a report called as a Credit bureau report. At times, the report can also contain remarks by the credit bureau. Along with maintaining your credit related information, Credit bureaus also house your personal information with regards to your address, salary and employer details.
Credit Bureau Report
A credit bureau report is a systematic representation of your credit information. The information can include your loan EMI repayments towards personal loan, vehicle loan or home loan. It also mentions how promptly you have made your credit card bill payments. The credit bureau report does not include any information based on your investment or savings.
The report mentions your Name, Date of Birth, Residential address, PAN, passport number, voters ID number, contact details, 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. As the report contains information about your credit and repayment history, it plays a key role in the credit institution’s evaluation process. It is therefore important to know what information is shared with the credit bureau.
Credit Bureau Remarks
Credit bureau report mentions your credit history, w.r.t. your credit card and loan. Each of these credit accounts will contain their current status and credit bureau remarks. In case you have closed a personal loan, then the remarks provided could either be ‘Written-off’, ‘Settled’ or ‘Closed’. Always strive to have the ‘Closed’ remark across your credit accounts. This means that the loan is paid-off. ‘Written-off’ and ‘Settled’ means that you have defaulted on your loan EMIs or you settled the loan with a lesser amount. These two can be considered derogatory or negative. If these credit bureau remarks persist on your credit bureau report, even a good income won’t be able to guarantee you the personal loan approval.
You can view all your credit bureau remarks under the ‘Account Information’ section of your credit bureau report. Two remarks that can appear on you report are ‘suit-filed’ or ‘willful default’. These 2 are also considered negative, and will seriously hamper your credit eligibility. Another section, on your credit bureau report, is the ‘Days Past Due’ section. It contains information on how late the EMI payments were made. The classification is done as Standard (STD), Special Mention Account (SMA) Sub-Standard (SUB), Doubtful (DBT) and Loss (LSS). If you see a ‘XXX’ in your ‘Days Past Due’ section, then it means that the credit institution has not reported the information for that particular month.
Another section, on the credit bureau report, is the ‘Consumer Dispute Remarks’ section. This allows you to make special remarks about your credit accounts.
Credit Bureau Score
The credit bureau score is a compiled numeric three digital score, mentioned on the credit bureau report. It can range anywhere between 300-900. The higher the score, the better the chance to get your credit approved. You should always be focused on improving your credit bureau score.
Credit Bureau Score Ranges
Your loan approval will depend on where your credit bureau score lies. They can range among the following.
Score of 0 or -1 – A credit score of 0, or less, means that you have no credit history.
Score between 350 to 500 – This indicates either a default in past EMI payments or excess credit utilization on credit cards. Loan application will be rejected.
Score between 550 to 650 – A score in this range, is acceptable. It indicates that you have been regular with your payments, and can be trusted for fresh credit. The chances of getting a loan approved are good.
Score between 650 to 750 – This range indicates that you are doing well with your finances. You should stick to your financial habits, to maintain or improve your score. You have great chances of getting a loan approved.
Score between 750 to 900 – This is considered as the best range. This clearly indicates that you have been regular with your EMI or credit card bill payments. You can avail a loan with ease.
To ensure you always maintain a healthy credit bureau score, pay your loan EMIs and credit card monthly bills on-time, avoid repeated application filling for a credit. Make sure you do not close all your credit cards at once, do not spend above the credit card limit, and always check for errors on your credit bureau report before applying for fresh credit.