Your credit report is your financial health report. If you have a consistent report with no default history, lenders are more likely to pass your loan application than for others. Before availing a loan, you must know your report history and the score as a borrower.

Interpreting Credit Report

Your credit report highlights four key elements in your financial existence in past relationships with every banking and insurance company. CIBIL maintains a credit score in the report based on the information provided by the institutions on a monthly basis.

Here is a breakdown of few key elements used to prepare Credit report.

1. Payment history

Payment history accounts for nearly 35 percent of the total credit history. It covers the entire borrower's debt repayment history, which is a very crucial factor in calculating scores. Loans for bad cibil score are rejected straight away if payment history is red flagged.

2. Credit Utilisation

Credit report will reflect a borrower's credit utilisation and highlight their credit card spending. Credit card users who often spill over their credit limit or reach their threshold are flagged with low scores. Loan for low credit score becomes harder to avail if credit utilisation score crosses 30 percent on CIBIL's report.

To boost your CIBIL score fast, make timely payments towards your loans, bills and debts without carrying too much balance on credit cards. Lesser the amount of money you owe to anyone, higher will be your score on CIBIL report.

3. Age of Credits

Longer the credit history better will be the score. Those who apply for credit cards before taking loans are flagged with poor score. Reports show perfect credit scores for individuals who have been using credit card for a long time and maintain debt-free relationship on long-standing accounts. Frequent credit card applications and closure are also reflected on report from CIBIL.

4. New Credits

CIBIL defaulter's list consists largely of individuals who have opened multiple credit card channels recently. They are red-flagged assuming that the loan sum will be paid from the credit card limit. It also highlights the fact that such borrowers are high risk customers who are in financial mess and need immediate credit to clear the previous debts. Individuals with less than 10 percent score on new credits have higher rankings in CIBIL report.

Credit Score and Its Significance

Credit report also documents instances of liens, bankruptcy and foreclosures. The score marked on the report could be anywhere between 300 and 850. Lesser the number of credit channels in use currently, lesser will be your liability and higher will be your score.

Before making a loan application, review your report and improve CIBIL score by cutting on credits and clearing all previous balances. Good credit score ensures:

ü Quicker loan approvals

ü Unbiased credit card approvals

ü Reasonable leniency and partial forgiveness on loan defaults

ü Lower credit rates on loans, credit cards and mortgages

ü Increased power to negotiate on lowering the interest rate on loans

ü Approvals on credit cards with higher limits

ü Extended repayment schedules

ü Better rates on life insurance, car loans and home loans

A satisfactory credit score is a matter of pride. Brag about it, if you rank in the top 15 percent of the screened population who maintain a score of 500 and upwards! 

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