Credit Score and Report FAQs
Q1. What is credit score?
Credit score is a 3-digit number usually between 300 and 900 . It is created using a complex statistical model that summarizes the past credit information of an individual. The number reflects the probability whether a borrower will pay off the loan in a timely fashion. A high number means you have been paying off your past dues (towards loans or credit cards) regularly and have rarely delayed payment. As a result, lenders have more confidence in extending credit to borrowers with high credit score.
Q2. What is the difference between credit score and credit report?
Your credit score is only part of your credit report. Your credit report covers your entire history of dealing with credit (loans and credit cards) including your history of payments (on time or delayed). Your credit history would also show the current status of each credit account – active, closed, delinquent, settled etc. These as well as other details of your credit report form the basis of your credit score.
Q3. How is CIBIL Score different from credit score?
CIBIL score is a 3 digit credit score which is calculated and furnished by The Credit Information Bureau (India) Ltd, which is largely accepted bureau and hence many leading lenders shows their interest for Good CIBIL score. However, credit score is a three digits number which is calculated by credit bureaus on the basis of one’s past credit history.
Q4. What is the difference between credit report and credit rating?
Credit report is applicable to individuals and is provided by one of the four Indian credit bureaus – CIBIL TransUnion, Experian, Equifax or CRIF High Mark. Credit rating, on the contrary, applies to companies and is provided by rating agencies such as CRISIL, ICRA, etc.
Q5. How can my credit score help me with loan application?
A high credit score is definitely an asset when it comes to loan and credit card applications. A high credit score (closer to 900) implies that you have good financial discipline and tend to pay off your dues on time. Thus, your chances of being approved for additional credit, in the form of a new loan or credit card, are higher. This is so because lenders perceive borrowers with high score as trustworthy. They notice the financial discipline of applicants and accordingly decide whether to extend new credit or not.
Factors impacting your credit score
Q6. How is my credit score calculated?
Credit score calculations use information from four key areas of your credit report: payment history of previous credit, number of active account and your credit to debt ratio. These are the major factors that affect your credit score and are included in your credit report.
Q7. How often can my credit score change?
Your credit score changes according to changes in your credit report. Therefore, your score is liable to change as new credit information is added or removed. Such changes include addition or closure of a credit card or loan account. That said, banks and other financial institutions report your information to credit bureaus once every month.
Q8. How often can I get an updated credit score?
You can apply for a credit report any number of times, however, as lenders report your credit information only once a month, you might not observe any change in your credit score before an interval of 1 month has passed between reports. If you apply for an Experian credit report through Paisabazaar, we will update your report every 3 months at no charge whatsoever.
Q9. Would having multiple credit cards affect my credit score?
Having multiple credit cards does not pose a problem by itself. However, having large amounts of unpaid credit card debt can cause your credit score to decline as you would be considered a risky borrower by banks. High credit card debt is considered to be a key factor that promotes future credit defaults. For more information, read Factors to consider before opting for multiple credit cards.
Q10. Would my score be affected if I check my credit score?
When you check your own credit score or access your own credit report, it is counted as a “soft enquiry.” As a result, your credit score remains unaffected no matter how many times you check your credit score. However, if banks and NBFCs access your report, it is seen as a hard enquiry and can impact your score.
Q11. Is my credit score affected by my loan/credit card application?
When you submit a new loan or credit card application, the prospective lender will access your credit score and report from one of the credit bureaus. This counts as a “hard look” and shows up on your credit report. Therefore, if you submit multiple applications within a short time period, you would be classified as a “credit-hungry” borrower and this can adversely impact your credit score. For further information, you can read Tips to improve your credit score.
Q12. Do late payments affect my credit score?
Paying bills on time is generally the single most important contributor to a good credit score. Being late on any bill, for any length of time is considered a possible indication of future non-payment of debt and is viewed negatively by lenders. Avoiding late payments is the best way to ensure a good credit score.
Q13. What happens to my credit score if I pay off a loan or credit card account?
If you pay off a loan completely or close out a credit card account, there is usually no immediate impact on your credit score and the account is marked as “closed” on your report. However, in case of a credit card account, make sure that you keep track of your credit utilisation ratio subsequent to closure of the account, as a high utilisation ratio makes lenders perceive you as credit hungry borrower leading to a decline of your credit score.
Q14. If I am a guarantor to a loan, does that show up on my credit report?
Yes. Your role as a guarantor shows up on your credit report and if the primary applicant is unable to pay off the loan, you will have to make the balance payments. Your credit score will be adversely impacted in case you too are unable to repay the loan.
How-to: Access Your Credit Score and Report
Q15. Who offers Credit Score in India?
At present, there are 4 credit bureaus operating in India – CIBIL TransUnion, Experian, Equifax and CRIF High Mark. All of these credit bureaus have their own unique scoring models and offer credit scores to Indian residents who subscribe to credit in the form of credit cards or loans. Your prospective lender may decide to obtain your details from one or more of these credit bureaus when you submit a new loan or credit card application.
Q16. Will my credit score be the same with all the credit bureaus?
No. Each credit bureau has its own unique scoring model therefore you score will be different in each case. However, rule of thumb is – the closer your credit score is to 900, the higher your score and the better your chances of being approved for additional credit (new credit cards/loans).
Q17. How much does my credit score/report cost?
The cost of getting a copy of your credit report varies from one credit bureau to another. It will cost you around Rs. 500 to get a copy of your report if you approach the credit bureau directly. However, if you apply for your credit report through Paisabazaar.com, we will provide you a free Experian credit report, along with our easy-to-understand report analysis.
Q18. Why should I get my credit score from Paisabazaar.com?
For starters, we are one of the few companies in India that provide credit score and report for free. But that’s not all. We will also give you online access to your Experian Credit Report, along with its complete analysis. Additionally, we will provide you with free updated credit report every three months containing any new information that is reported by your lender(s).
Q19. Why am I not getting a credit score/credit report?
Credit scoring models cannot generate a score without enough past credit information. If you have a very recent credit history or haven’t taken a loan or credit card in the past, you probably will not have a credit score available.
How-to: Read your Credit Report
Q20. What do the terms Closed and Active on my Credit Report mean?
Just like a medical report, your credit report will also include some key terms and abbreviations that explain the status of specific accounts. Some of these are:
- Closed -This appears when a credit card or loan account has been paid in full and closed out. The date closed field will also contain details in this field.
- Active – This appears when a credit card or loan account is currently operational.
For additional details, you can read “How to Read Your Credit Report”.
Q21. How many sections does a credit report have?
Your credit report has five key sections–
- Credit Score – Your credit score as provided by the credit bureau report.
- Personal Information – PAN number, address, phone number, etc.
- Account Information – Contains information regarding previous and current loans and credit cards.
- Enquiry Section – Contains list of lenders (with dates) who have enquired regarding your report/score.
How-to: Maintain Credit Score
Q22. How do I maintain/improve my credit score?
The key factor that affects your credit score is your payment history (credit card dues/loan EMIs), followed by the type of credit and the amount of money you owe to various lenders along with your available credit utilisation ratio. So you can maintain a high credit score as long as you have made your EMI/Credit Card dues payment on time and haven’t gone overboard with respect to your unsecured loans such as personal loans/credit card debt. In case your credit score has suffered due to past mistakes, start by paying off your current dues and ensure you stick to your payment schedules going forward so that you can start on the road to recovery. For more details, read Ways to Improve your credit score.
How-to: Resolve Credit Report Issues
Q23. What kind of errors should I look out for in my credit report?
Credit report errors are classified into 3 categories –
- Identity Errors – Credit reports are based on information received from banks and NBFCs in India, hence some errors like your residential/office address might be out of date as your bank/NBFC has not reported this information to Experian, CIBIL or Equifax. Usually this information has no impact on your credit score. Another case is when you share the same name with another bank customer and the records get switched due to a clerical error. This can have a significant impact on your credit score hence it is best to get such reporting errors corrected.
- Incorrect Account Information – This mostly occurs when your current or previous lender provides incorrect details or the credit bureau makes a mistake when processing the information received. Common examples include incorrect loan account balance, incorrect credit card limit, mistakes in loan origination date, etc.
- Fraudulent Accounts – This is the most serious type of error and it does not result from reporting or typographical errors. This can only occur if you are a victim of identity theft and someone is taking loans or opening new credit card accounts using your information such as PAN card number and ID card. You definitely need to report this to your bank and current lenders as well as get in touch with the credit bureau to get these details rectified.
Q24. Can my report show a loan or a credit card under my name even though I never sought one?
Yes. Though extremely rare, a loan or credit card you never applied for might appear on your credit report. There are two possible reasons to this – firstly, the bank/NBFC might have made a mistake when reporting this data and ended up switching your records with someone else – this is the less drastic possibility. The second and more drastic possibility is that you are a victim of identity theft. In this case, your personal details, such as PAN Card and Aadhar Card, are stolen to obtain loans or credit cards. In either case, your credit score may be impacted. So get in touch with the credit bureau as well as your bankers and other authorities in order to get the erroneous records rectified.
Q25. How do I get my credit report corrected in case of an error?
To get your credit report corrected, reach out to us. We have partnered with Credit Seva to help our customers get actionable insights with respect to improving credit score and correcting credit report.