Credit Report

A credit report, also known as a credit information report (CIR), is a detailed record of a person’s credit history and is generally prepared by a credit bureau. This would include all the loans taken by the person, how the loans were repaid, the companies that have given credit and other details of public record.

Therefore, a credit report serves as an important measure of a person’s financial stability. The report is useful for creditors, utility companies, employers, and others to analyse the credit history of a person and figure out where they stand financially and whether they have defaulted on any credit or loan repayments in the past. But credit reports can also be useful to individuals to analyse their own financial history, which would help them catch any inaccuracies or cases of identity theft early.

We know that a credit report contains a detailed credit history of an individual. When the same is encapsulated in a number, then that number is known as the credit score. A credit score is arrived at on the basis of the data contained in the credit report. Therefore, while a credit report is a stand-alone document, the credit score depends on the credit report.

However, different credit score calculators may have certain differences in their criteria, such as attaching varying weights to different factors. Also, when it comes to utility - employers, landlords, etc. are more likely to ask for a credit report while credit card issuers would be more interested in the individual's credit score.

While you can get a free credit score check and credit report for yourself, understanding your credit report is the crucial step towards making better financial decisions. The report generally contains the following types of information.

• Personal Information
  This includes personal details such as accounts, ownership, credits and loan amounts, account status, payment history, and so on.
• Enquiry Information
  This refers to all the companies that have asked to view your credit report with a certain time period. If many companies have requested such inquiries, it could have a negative impact on your credit health.
• DPD Information
  Also known as ‘Days Past Dues’, this is a record of payment timelines of a person’s credit accounts. This shows whether or not the person has been able to pay their loans or credit card dues regularly.
• Remarks
  Credit reports use certain remarks to indicate a person’s current state of accounts. This includes remarks such as ‘settled’, ‘written off’, ‘wilful default’, ‘post write off settled’, and ‘closed’. It is important to understand what all these mean in order to be able to properly understand your credit report.

While reading your report, it is always better to double-check all your details and ensure that there are no discrepancies.

In India, there are 6 credit reporting agencies that are registered under the Securities and Exchange Board of India (SEBI). These are:

• Equifax Credit Information Services Pvt. Ltd.
  Equifax started in 2010 and scores individuals on a scale of 1 to 999 with 999 being the highest score. Higher the score, easier it is for a person to get access to credit.
• TransUnion CIBIL
  CIBIL is the most popular credit reporting agency in India. For this reason, the credit report may even be called the CIBIL report sometimes. Established in 200, it scores individuals on a scale of 300 to 900, with 300 being the lowest. It offers various products and is associated with many financial institutions.
• Experian Credit Information Co. of India Pvt. Ltd.
  Established in 2010, Experian also scores individuals between 300 to 900, with 300 being the lowest score.
• CRIF High Mark Credit Information Services Pvt. Ltd.
  CRIF provides credit scores, credit reports and various other services.
• ICRA
  Set up in 1991, ICRA is one of the most experienced credit rating agencies in India.
• Credit Rating Information Services of India Limited (CRISIL)
  Effective since 1987, CRISIL was India’s first credit rating agency.

Of these, only 4 agencies provide credit reports to individuals currently. These are Equifax, CRIF High Mark, TransUnion CIBIL, and CRIF. These agencies only provide reports to customers while it is the lenders that make the decision about giving loans to borrowers.

As stated earlier, credit reports are largely used by lenders to assess your financial record. In a way, the lender gets a broad view of a customer’s credit history and along with the lender’s own customer data, this helps them decide the customer’s eligibility for credit. A report that contains defaults in payments, bankruptcies etc. could result in lenders potentially declining loan applications or perhaps assigning higher interest rates.

Moreover, too many enquiries by companies in a short period of time may not look good on your credit report. This is because credit scoring models used by lenders may factor in the number of hard enquiries on your credit report while evaluating your loan application. Therefore, keeping a good financial track record always pays off when it comes to applying for credit.

It is important to know certain key terms in order to understand a credit report.

• Credit Inquiry- It refers to a request by a company or lender to look at your credit file and can be either a hard inquiry (by lenders) or a soft inquiry (which is a review of your credit file and does not impact credit score).
• Charge-off- When an account is ‘charged-off’, it means that the lender has written off the account because of lack of payment. Therefore, the account is closed to future charges.
• Account Age- This refers to how long your credit account has been open for.
• Account Status- This indicates the status of the account, ie whether open or closed, and may have descriptions like ‘collection account’ etc.
• Collection Account- An account that has been transferred to collection agencies by a lender due to default on payments for a certain period of time.
• Installment Account- Such an account is a credit account that is repayable in installments. When the loan is completely repaid, it is considered closed.
• Good Standing- This refers to an account that has been or is being paid off on time.
• Thin Credit File or No Credit File- This means that a customer does not have a credit history (or enough current credit history) to produce a credit score.