To understand simply, a credit bureau collects and maintains information of an individual’s payment with respect to loans and credit cards from various sources and provides valuable credit information to its customers. The records also contain general information details such as the applicant’s age, citizenship, insurance details and past employment data.
What it means at an individual level?
The credit score not only helps loan providers to identify customers, likely to pay back their loans on time but also helps them to do this economically and quickly. This certainly results in faster loan approvals.
The credit score is usually 3-digit number that shows the numeric summary of your credit health. The score ranges from 300-900. A higher rating translates into a higher probability of getting loan approvals. In India, credit scores are calculated by credit information companies like CIBIL, Experian and Equifax. A score above 700 is considered good credit management. Every financial transaction in your life involving credit is recorded in your credit history.
It also helps the lenders to determine how much interest you can pay on loans, insurers to calculate premiums, employers who are hiring to ascertain financial stability of a new hire and landlords before appointing a new tenant. Since this information is extremely critical, thus it is important that the information provided is correct and updated.
[Also Read: Tenant Verification – Why it is important?]
With an increasing demand for credit scores, several verification companies and verification mobile application firms are introducing mechanisms to check credit scores instantly. Usually integrated with the leading credit bureaus in India like CIBIL and Equifax among others, allows the lender to perform quick credit verification on the applicant offering a credit score basis his income, loans outstanding and other details.
How do I improve my credit ratings?
Research suggests that nearly 91% customers on being surveyed weren’t aware of the impact of non-payment of dues. This explains the importance of reviewing your credit scores every year and ways to repair it:
a. Pay your bills regularly.
b. Clear all your debts.
c. Do not default payments on your credit card.
d. Reduce your credit card usage.
e. Pay your EMIs on time.
Even if you have made mistakes in the past, there is no reason to worry. There are ways to repair your credit scores. It is important to be consistent with the payment of all your dues and bills since you need to maintain a “no late payment” status for at least seven years to build a good score.