Most lenders focus on borrowers’ cibil scores while rejecting or approving credit card or loan requests. So it becomes important for you as an applicant to be clear about the concept of credit score.
So here, let’s answer some not-so-frequently asked questions on credit score and cibil report.
Does a person’s credit score take into account their family history?
No. Your credit score is not influenced in any way by the credit history or credit profile of your family members.
If, on the other hand, you have agreed to be a guarantor or co-signer on loan for a friend or member of your family, then you share equal responsibility for ensuring that the loan is timely repaid. If the principal borrower in the loan commits any kind of delay in the loan repayment or defaults on loan, your free cibil score will also get harmed because you are a co-signor or guarantor for the loan.
Does one’s employment situation have an impact on their credit score?
Your employment situation will not in any way affect your credit score, so don’t worry about that.
On the other hand, some businesses have made the decision to include applicants’ credit scores as one of the variables they use to evaluate job applications. During the hiring process, certain companies in industries such as telecommunications, credit rating agencies, banking, and insurance have begun to conduct credit checks on prospective employees.
Those who have a low credit score have a greater likelihood of having their employment opportunities limited by certain types of businesses. This is due to the fact that a low credit score may be a reflection of irresponsible behaviour when it comes to the repayment of loans and credit card bills.
Does one’s income also go impact their credit score?
Your income level does not have any bearing on your free cibil score, contrary to popular belief.
Where can we find our credit report, and how can we receive it?
At the very least, once every year, each of the four credit bureaus in our country is required by law to give free credit reports. The requests for free cibil reports that consumers make should be spaced out throughout the course of the year in such a way that they are able to obtain one free credit report for each of the four seasons. Consumers also have the option of visiting online financial markets, which will allow them to gain access to free credit reports as well as their monthly updates.
What to do when a credit report has an error or some other issue?
Because the cibil report contains the credit information that was provided by lenders and credit card issuers, any error that was made by your lender or by a credit bureau can have a negative influence on your free cibil score, which in turn can affect your eligibility for future loans and credit cards.
In the event that your credit report contains any inaccuracies, transactions that are new to you, or fraudulent activity, you are obligated to immediately notify your lender as well as the credit bureau that is involved and ensure that the problem is corrected. Your credit report would immediately and automatically show the new credit score after the error has been corrected.
How does a credit report differ from cibil score?
The summary of your ongoing loans, historical credit accounts, and current credit card balances can be seen in your cibil report. When determining your credit score, all of this information is taken into consideration.
Your credit score, on the other hand, is a three-digit figure that is used to summarise your credit history and illustrate your trustworthiness as well as your behaviour regarding repayment of debt. It gives an indication of how successfully you have been handling the repayment of your debts in the past, including the bills for your credit cards and the EMIs on your loans. Your free cibil score is included in the portion of your credit report that details your report’s contents.
What kind of impact do debit and prepaid cards have on one’s credit score?
Your credit score will not be impacted in any way by the use of debit or prepaid cards.
Does early loan repayment have an impact on the credit score?
No, paying off an existing debt early will not have any effect on your credit score.
What are the pitfalls of maintaining a low credit score?
Because your credit score is one of the most important factors that lenders consider when deciding whether or not to approve your application for a loan or credit card, lenders will typically offer consumers who have a high credit score more favourable terms and conditions as a well wider variety of options.
If you have a credit score that is lower than 750, your chances of getting approved for a loan are likely to be lower because of this. Lenders normally prefer a credit score of 750 or above when providing loans to customers.
A low credit score presents a greater risk to lenders because there is a higher likelihood that the borrower will not pay back the loan in the future. As a result, borrowers with a low credit score are offered loans at a higher interest rate, or their applications may even be denied altogether.
If our free cibil score is strong, is it possible that we could pay a lower interest rate on loan?
Because a good credit score reflects disciplined repayment behaviour in the cibil report and a lower probability of defaults in the future, it prompts lenders to favourably treat borrowers with a good credit score and provide faster loan approval and credit card application. This is because a good credit score reflects disciplined repayment behaviour in the past and a lower probability of defaults in the future.
Some loan providers have begun offering interest rates on loans that are calculated based on the applicant’s credit profile, a practice that is known as credit risk-based pricing. People who have solid credit histories might be eligible for loans with reduced interest rates, which brings down the total cost of the loan as well.