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What is Credit Score

A credit score is a measure of an individual’s ability to pay back the borrowed amount. It is the numerical representation of their creditworthiness. A credit score is a 3 digit number that falls in the range of 300-900, 900 being the highest. You should always work towards reaching a credit score that is close to 900. A higher credit score offers you several benefits and helps you at the time of getting a loan or a credit card. Having a low credit score suggests you have not been a responsible borrower and have been slacking off repaying the borrowed sum. Credit scores are calculated by the credit bureaus in the country after taking into consideration several factors like the length of your credit history, repayment records, credit inquiries, among others. When you apply for a loan or a credit card, lenders like banks and non banking finance companies check your credit score to see whether you have the ability to repay the credit. If you have a higher credit score, you are entitled to receive preferential pricing and get discounts on the interest rate. Moreover, a high credit score gives your the additional power to negotiate for better rates of interest on loans.

Steps To Get Your Free Credit Score

  • Visit LoanQubes.com and click on the ‘Check your free Experian credit score’ button
  • You can also visit
  • Select your gender
  • Mention your age
  • Select the city you currently live
  • Mention your occupation (salaried/ self-employed). If you are a salaried individual, specify the name of your company
  • Specify your fixed net monthly salary
  • Add your personal details like first name and last name
  • Mention your contact details such as mobile number and email. (The mobile number is used to verify if you are the right owner of your credit information )
  • You will now have to verify your mobile number with an OTP
  • Specify your PAN number
  • You will now get your free Experian credit score



Credit Score Range and What It Means

  • A credit score ranges between 300-900. The closer your credit score is to 900, higher the chances are for you to get a good deal for loan as well as credit card. Let’s take a look at the different credit score range:
    • NA/NH : In order to calculate your credit score, you need to have a credit history. If you have no credit history, your credit report will mention that your credit score is NA/NH.
    • 300 -550 : A credit score in this range is considered as a poor credit score. It suggests that you have defaulted your payments and have unpaid dues.
    • 550-650 : A credit score in this range is considered as average. You will still have to take measures to improve your credit score.
    • 650-750 : A credit score is this range is considered as good and lenders will consider granting you credit in the form of loan or credit card. However, you might still not be in the position to negotiate for a good deal.
    • 750-900 : With a credit score in this range, you will be less likely to turn as a defaulter and lenders will be willing to offer you with a great deal for loan as well as credit cards. A credit score in this range also gives you the additional power to negotiate for better deal in terms of credit card rewards and interest rates.

Who Computes Credit Score?

Your Credit Score is computed by Credit Information Companies. There are four companies in Indian which do the job– CIBIL TransUnion, Experian, Equifax and High Mark.Let’s unveil the mystery around how these companies compute your score.

When you make a transaction—the one that is relevant to determine your score—banks send details about it to all four credit bureaus. To send details to all credit agencies is a mandate by the RBI. Essentially, banks keep Credit Information Companies up-to-date about your monetary habits. If a bank needs to check your Credit Score, they can approach any one of the bureaus. It doesn’t matter which one because all will have the same score for you– all four are equally authoritative and on par with each other.

After receiving information from the bank, credit bureaus get down to the task of collecting more information about your financial habits from other banks and financial institutions. The credit bureaus then processes this information to formulate what is called a Credit Report.

Now, what is a Credit Report? A Credit Report is your financial marks card. It contains your Credit Score. It’s wiser to check your score from time to time.
Why Should I check my Credit Score?
It is very important that you keep a close eye on your Credit Score. It is the best way to gauge your chances to get a line of credit. Another reason why you should track your score is to know if it dips, or if an error has been made by credit agencies while calculating your score. This will help you make timely amends.

Do the Four Credit Agencies Compute Scores Differently?
Though the processes followed to compute your score might differ from agency to agency, your Credit Score calculated by all will be the same. This is because banks intimate the relevant information to all four agencies. Therefore, no matter which agency a bank picks to check your Credit Score, there will be no major discrepancy in it.

Of the four agencies, CIBIL, however, is the most popular since it was one of the first Credit Information Companies to start operations in India. This has fuelled the notion that CIBIL Score is more accurate than a score from other agencies. This, however, is not true. Banks give equal weightage to scores from all four agencies. Equifax, Experian and High Mark Credit Scores are as good to banks and other financial institutions as CIBIL Score.

Loan Qubes has tied up with Experian, which means that we can help you check your Credit Score for free. Otherwise, it costs a few hundred rupees.

Isn’t CIBIL the Deciding Factor in a Loan?
Though many believe this, it’s not true.

All Credit Information Companies, including CIBIL, create your Credit Reports which tell banks about you credibility. Second, CIBIL and the other credit agencies do not entertain requests from individuals to make changes to financial details in Credit Reports. Changes are incorporated when banks provide relevant information to these agencies. This ensures that information in your Credit Report is legitimate. After all, your Credit Score is one of the most important factors considered by banks when deciding about your loan or Credit Card application. Your Credit Score also determines the interest rate banks chalk up for you.

So make sure that you score big on this one!

Why is Loan Qubes Giving me my Credit Score for Free?
Loan Qubes feels that you should always be in complete command of your personal finances. In order to help you with this goal, we have made provisions for you to check your Credit Score for free. Knowing your Credit Score before applying for a loan can help greatly.

If you have a good score, you can be rest assured that your loan or Credit Card application will be processed without any hassle. You can even leverage a good score to ask your lender bank for better rates of interest and additional benefits. On the other hand, seeking credit with a poor score will further lower your score. Let’s not even imagine getting approval for a credit line. Hence, check your Credit Score before you apply for a financial product. Work up the score if it’s not in the acceptable range.

Does my Credit Score Get Impacted if I Enquire About it?

It depends on the kind of enquiry being made. There are two types of enquiries – hard and soft enquiry. Hard enquiries send your Credit Score down by a few points, while soft enquiries do not impact your Credit Score.

An enquiry made by an individual is called a soft enquiry. Loan Qubes will make a soft enquiry on your behalf when getting your Credit Score from Experian. Hence, this will not impact your Credit Score in any manner. Moreover, checking your Credit Score on our website is free!

TIP: It’s wiser to check your Credit Score from time to time so that you stay in the know. Always check your Credit Score before applying for a loan/card. You will know whether your score will tide you over or if it needs fixing.

A hard enquiry is when a financial institution checks your Credit Score to take a decision on your credit application. Every time you apply for a loan or a Credit Card, the lending institution checks your score. Each time a bank checks your score, your score will dip by a few points.

TIP: If you are applying for a loan or a Credit Card, do not apply to many banks at the same time. Too many enquiries will hurt your Credit Score

 


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What Makes Your Credit Score Go Down?

It is understood that having high balances on your credit cards can significantly reduce your credit score. Apart from that, there are several other factors that can hurt your credit score:

  • Being late on your credit payments.
  • Completely ignoring your loan dues/credit card bills.
  • Creditors charge off accounts when credit card bills are not paid on time. The status of having your account charged off is one of the worst incidents that reflects on your credit score.
  • Lenders use third-party debt collectors to retrieve the loan amount from you, in case they do not receive payments. Having your account sent to collections reflects very poorly on your credit score.
  • Filing for bankruptcy can have a devastating effect on your credit score.
  • When you request to close a credit card that has an outstanding balance, your credit limit drops to Rs.0. This is similar to a situation where you have maxed out your credit card.
  • Closing old credit cards shortens your credit history. This has a negative impact on your credit score.
  • Applying for multiple credit cards or loans within a short duration makes your credit score plunge. Hence, it is advisable to limit the number of applications.
  • Having only one type of credit account will negatively impact your credit score. So, you should look to maintain a mix of loans and credit card debts and make consistent payments on time.
  • If you fail to check your credit report occasionally and fix errors, if any, your credit score can be hurt. It should be understood that credit reporting bureaus also make mistakes while creating credit reports. If you do not monitor and correct your report, it may cost you a lot in the future.

Change in Credit Score – How Often Does it Happen?

When you work on improving your credit, you should be very patient, so as to not get discouraged. Credit scores are calculated from your credit report. When you request for the score from multiple credit reporting bureaus, you may see a slight variance in the figures. This is fine, as long as the difference is not massive.

In order to understand how your credit score changes over time, you should know how often there will be updates to your credit report. Lenders/creditors usually report your credit information (both positive and negative) to credit bureaus once a month. So, technically your credit scores can change a little each month, based on the information that is updated.

How Do Big Fluctuations Happen?

Most of the changes in your credit score happen incrementally. Although you would not see changes instantly, over a period of time this can add up to a considerable amount.

However, there are certain factors that could instantly have a huge negative impact on your score. This includes a delinquency, i.e., a significantly late payment such as a 30-day delay on a credit.

Another big influence is the credit utilisation ratio. This refers to the amount you owe as debt as opposed to your credit limit. So, an increase in credit card debt will cause your credit utilisation ratio to rise, which in turn drops your credit score.

Consider another scenario in which you pay off all your credit card debts in one go. Your credit utilisation ratio will fall in this case. This would lead to a temporary hike in your credit score.

How Does the Credit Score Affect You?

A bank or lender would check your credit score or report to review your credit management skills, based on the review, a lender may or may not give you a credit. It is advisable to keep an eye on the credit score before applying for a credit card  or loan. If you have a poor credit score and you keep applying for credit, every reject will further lower your score.

A good credit score will empower you with the ability to negotiate the interest rates. The banks or lender would like to offer a credit line to someone with a better credit score.

Calculation of Credit Score

Credit bureaus in the country compute credit scores after considering several factors such as credit history and repayment behaviour. There are total of four credit bureaus in the country viz – TransUnion CIBIL, Experian, Equifax, and CRIF High Mark. All these credit bureaus are licenced by the Reserve Bank of India (RBI). The financial institutions in the country send credit details of an individual on a monthly basis to credit bureaus. Each credit bureau has their own algorithm and method of calculating credit scores. Below are five factors that are taken into consideration at the time of calculating the credit score:

    • Credit History

Credit history is one of the most important factors that affect your credit as it accounts for 35% of your total credit score.

    • Credit Utilisation

The credit usage is the second biggest factor that comprises your credit score. It accounts for 30% of your total credit score.

    • Age of the Credit

The age of the credit accounts for 15% of your credit score. If you have handled your credit well and served the loan for a longer period by making timely payments, then it will positively affect your CIBIL score.

    • Mix Credit

The types of credit present in your credit score accounts for 10% of your credit score. It is better to have a good balance of secured as well as unsecured loans in your credit history. A mix credit helps to boost your credit score.

    • Credit Inquiries

Credit inquiries account for 10% of your credit score and therefore you should not apply for multiple credits at the same time.

Monitoring Your Credit Score

The credit score is updated on a monthly basis based on the relevant information provided by financial institutions. It is advisable to keep an eye on the credit score to determine your financial credibility while applying for a loan or a credit card. It will help you in avoiding the situation where your credit application are getting rejected due to a poor score. By monitoring the score on a regular basis will help in identifying mistakes and correcting errors before they are too late.

Soft vs. Hard Credit Inquiry

When you are obtaining your credit score or report, it is considered to be a soft inquiry and it doesn’t have any adverse impact on your score. When the bank or lender inquiries for a credit report, it is referred to as hard inquiry and it can reduce your score. You can be rest assured that your credit score won’t get impacted due to soft inquiries.

A credit score inquiry through Loan Qubes would require furnishing PAN card details along with phone number. This information is required for verification purpose only to identify you as the owner of the report. The credit score is completely free in addition to the process being simple and fast.


What are Credit Reports?

Credit reports are a summary of an individual’s credit history. The report contains details of the credit and loan history along with other basic details. Most lenders (banks) use the credit reports in making effective lending decisions. In a credit report, you will find information related to all types of loans and credit account, the report will also contain details such as the name, date of birth, PAN card number, address, etc. You can also find details related to the last credit report check performed by a lender. In India, there are four major credit information companies (CIC)) that provides credit reports of individuals. Some of the CIC offer a free credit score check while the other don’t, however, lender pay a fee while obtaining a credit report of an individual. When an individual applies for a loan or a credit card, the bank will review their credit report before approving the loan/credit.

The CICs collect the individual’s information from financial institutions such as banks as well as government agencies such as the Income Tax Department. These reports help the lenders in minimizing repayment defaults by avoiding individuals with a bad credit history. Though the banks are not solely relying on these credit reports to give out loans/credit, these reports play a crucial role in the calculation of eligibility.

The following CICs gather individuals financial information to prepare credit reports in India:

  • TransUnion CIBIL Limited: (earlier known as – Credit Information Bureau (India) Limited) is the first Credit Information Company (CIC) of India that was founded in August 2000. The company collects and maintains records of an individual’s repayment habits related to loans and credit cards. These records are sent to TransUnion CIBIL Limited by the member banks and financial institutions on a monthly basis. The information received from these establishments are used to create Credit Information Reports (CIR) and credit scores. These reports and credit scores are provided to lending institutions such as banks in order to help them make lending decisions.
  • Experian Credit Information Company of India Private Limited: With headquarters in Dublin, Republic of Ireland, Experian uses its own methods of calculation to create credit reports. The credit report from Experian has information of an individual’s credit and loan history that are bought as credit reports by various banks in India. Similar to TransUnion CIBIL Limited, Experian collect information from the member banks and other establishments. The lenders are required to pay a fee to obtain credit reports from Experian.
  • Equifax Credit Information Services Private Limited (ECIS): One of the oldest credit information companies of USA, Equifax is also the largest credit reporting agency in the US. Headquartered in Atlanta, Equifax provides credit reports for individuals as well as businesses. Equifax has tied up with various banks and institutions in India that help the company in creating credit reports and assessing credit scores.
  • CRIF High Mark: Considered to be one of the few credit information company that specializes in analytics, scoring, and credit management solutions. CRIF High Mark creates credit reports based on the information collected from banks, Income Tax Department, and other banking as well as non-banking companies. The credit reports from CRIF High Mark are available against a fee. There are many Indian banks who have tied up with CRIF High Mark to create reports and to assess their borrower’s financial credibility.

What are Credit Reports Used for?
The CICs will evaluate an individual’s credit history to calculate a score that represents the individual’s credit worthiness. Each CIC has their own method of assigning the score, however, a high score will indicate a healthy credit score while a low score can decrease the chances of loan application approvals. Most of the CICs will provide you with a free credit score while a fee is charged towards the credit reports.

Why Credit Reports are Used?
The credit reports are used by lenders such as banks to determine the repayment capability of a loan/credit seeker. The credit report provides a useful insight into understating an applicant’s past credit repayment behavior. A credit report will also contain information related to late or missed payments that can adversely affect your credit score. When an applicant applies for a loan/credit, the lending institution will look into the credit report to determine whether you will be able to repay the loan amount. There can be various reasons for obtaining a credit report, such as:

Determining creditworthiness
Reviewing missed/late payments
Checking the credit score
To analyze all credit and loan accounts under one platform
Reporting errors on the report
Making effective landing decisions, etc.
You can refer to any CIC’s website to check whether you can purchase a quick credit report of yourself. These reports will help you in keeping a close tab on your credit score that can be useful while applying for any type of loan/credit. Reviewing the credit report periodically will also enable you to report any incorrect entries/information. If you are planning to apply for a loan/credit card, it is essential to make sure that you have a healthy credit score and report so the chances of loan application approval are higher

The Application Process for Obtaining your Credit Report

Most CICs offer credit reports through online and offline mediums. The individual will require producing of required details and make a payment to get his/her credit report.

The following documents and details are required for obtaining a credit report online:

  • Name
  • Date of birth
  • Address
  • PAN card number
  • Identity authentication

The following documents and details are required for obtaining a credit report offline:

  • Visit the CIC’s site to download and fill out the form requesting for your credit report
  • Self-attested and scanned copy of any of the Proof of Identity (PoI) such as PAN Card, Driving License, etc.
  • Enclose a Demand Draft (DD) that is payable to the relevant CIC for the required fee
  • Mail the documents along with the DD to the address mentioned on the CIC’s website

The online process will be quicker compared to the offline method, however, you can track the status of your credit report for free. The CIC will typically email the password-protected credit report to the individual when the credit report is requested through the online facility. In the case of offline application, the credit report will be sent through postal/courier services.

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