Ravi(name changed) approached his bank for a personal loan. He was in desperate need of that. The bank asked him to provide all the sources of his income. He was confident that he will easily get it. He was working with a reputed steel major as a deputy General manager.
But, he was shocked that he is not eligible for loan at the moment. He kept wondering what was it that will stop him from borrowing a meagre sum of just Rs. 2 lacs from the bank. He need it urgently for payment of his son’s college fees.
When he approached the bank and asked the bank official for the reason of denial, he came to know that his Credit report reflected a write-off. What? Write off? How does the bank come to know that he had a write off?
There are many of us who are having no idea about the credit reports. So, in this post, I will tell you all about Credit reports.
Credit Reports are used for personal finance. So, if you have ever been to a bank for availing a loan facility, then, you might have heard about this kind of report.
So, let us get to know about this credit report that the bankers often talk about for lending.
What is Credit?
Anything that you borrow is a credit in the banking parlance. For example, you borrowed a sum of Rs 1 lac as a personal loan. This would mean that you have taken a credit of Rs. 1 lac from the bank.
What is a Credit Report:
So, if we try to understand the term, Credit Report now, it would mean that it is a report that contains all the information about your Credits.
The credits may be from different banks and finance companies. All the financial institutions who are involved in the lending in India and come under the purview of Reserve Bank of India share their lending data with a Credit Bureau.
A credit bureau is an agency that takes care of this work on adedicated basis and generates the Credit Reports. For example, CIBIL India is one such agency that provides the Credit Reports to banks, financial institutions.
What does a Credit Report Contain?
A Credit Report is a detailed report on your Credit Behaviors. Let us talk about the legends it has:
- The Credit Details:
- The Lending Amount.
- The lending institution
- The Repayments history
- Your personal data like your address, contact number, Adhar Number, Pan Card Number etc.
- The status of your Credit like if it is settled or written off
These details reflect on the Credit Report for each of the borrowing that you have done.
So, if you have borrowed, let us say from 5 different banks/lenders, and then the CIBIL report will have the data for each of these loans.
Why Credit Report Matters?
Credit Report is critical to have your loan approved. If you do not have a good credit report, the lender may deny the loan or future credit to you without giving any reason.
Lending is at the discretion of the lender and you cannot dispute their decision if the reason falls in the ambit of the fair lending practices.
How to get a good Credit Report:
If I were to suggest you to get a good score, then I would simply say, make your repayments to your lenders/ bankers in time.
The borrowers who become defaulters cannot run away as the Credit Report catches them and nails them.
So, your credit behavior should be fair enough to maintain a good score in Credit Report.
What is a Credit Score?
The Credit Rating agency assigns a value to your credit behavior. So, it is easier for the lenders to take credit decisions.
The Credit Bureau rates you on the scale of 0 – 1000.
What is a good Score ?
A score above 750 can be considered a good score. All the critical parameters are factored in your Credit Score. So, try to keep your score above 750 at all times.
It is a good practice to check your credit score from time to time. These days, credit rating agencies have tied up with many banks/lenders to provide the Credit Scores to their customers.
For example, SBI has an option on it’s internet banking that you can use to check your Credit Score.
How to check your Credit Score on SBI Internet Banking?
So, if you have an account with SBI and have a internet banking access, you can login to your internet banking and use the below steps to generate your own Credit Score.
What if you do not borrow money at all from any bank/lender?
Even that is not good. When you don’t borrow, you will not have any credit history. As a result, there will be no way to check your credit behavior. So, it is reasonable to maintain a decent credit history. I mean you can borrow for small things and have them listed on your Credit Reports.
That will help you when you go for seeking a big ticket loan like a Car Loan or house loan etc.
