Decoding Your Credit Report: A Short Guide

Understanding your credit report is crucial to your financial journey and can empower you to make informed financial decisions

Your credit score is a three-digit number between 300 and 900 which reflects your financial behaviour

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Your credit report is an important document that details your credit consumption habits. It includes details such as your credit accounts, repayment history, existing debts, etc., and helps lenders assess your creditworthiness and financial responsibility. Understanding your credit report is crucial to your financial journey and can empower you to make informed financial decisions. Here is a list of the sections typically listed on your credit report and how you can interpret them.

Credit score

Your credit score is a three-digit number between 300 and 900 which reflects your financial behaviour. It is calculated by factors like repayment history, credit mix, utilization ratio, credit history length, and credit inquiries. A score above 750 signals stronger creditworthiness and improves your chances of securing credit on favourable terms. However, a score below 600 is considered poor and can make borrowing difficult.

Credit accounts

This section lists details of all your past and present credit accounts – loans and credit cards. The section will provide additional details about each account, such as the account number, type (home loan, vehicle loan, education loan, credit card, etc.), status (active or closed), holding (joint or single), credit limit or loan amount, ownership details, payment history of up to 36 months, outstanding balance, and amount overdue. These details reflect your borrowing and repayment habits, which lenders consider when evaluating your application.

Days Past Dues (DPD), typically mentioned as a remark or numeric, is a record of your credit account payment schedules. This is mentioned in case of a payment default or delay for any credit account.

Carefully review this section to ensure only your accounts are listed, and no closed accounts are inaccurately marked as active. Check your payment history for any discrepancies, such as wrongful defaults or penalties and promptly dispute them with the credit bureau.

Profile information

This section contains your personal information, including your name, gender, date of birth, and identification details (Aadhaar, passport, driving licence, Voter ID, PAN, etc.). It also lists your contact information, such as your addresses, phone numbers, and email address. Additionally, it may include your occupation and income at the time of opening a credit account, as reported by the lender. Review this section to ensure all details are accurate. Discrepancies can lead to mismatches during credit applications, potentially impacting your credit score.

Enquiry information (Hard Inquiries)

Hard inquiries are credit report checks made by lenders for a loan or credit card application. Multiple inquiries in a short time indicate poor financial management and can hurt your credit score. Review this section regularly to ensure the accuracy of all enquiries and dispute any unauthorized inquiries, which can negatively impact your score.

When you check your credit score yourself, it is called a soft inquiry and does not impact your credit score. Moreover, it is advisable to review your report regularly to ensure the information is accurate and up to date. Any discrepancies should be promptly flagged to the credit bureau to minimise their impact on your credit score and overall financial health.

The author is the Manager, Communications at BankBazaar. This article has been published as part of a special arrangement with BankBazaar.