IndiaLends Advisory

By IndiaLends Advisory

Jul 16, 2018

Understanding Credit Report: Everything You Need To Know

Now you know how a good credit score is important and how you can check your credit report. But how would you understand what your scores mean? What do the things mentioned in your credit report stand for? Let’s break everything about credit scores down for you-

Let’s start with the basics

Suppose you need an unsecured personal loan. You apply for a loan in a bank. Now since the loan is unsecured, how will the bank know if it will their money back from you? They pull out your credit report. This consists of your debt history and your repayment (or default) records. There is also a credit score, a three digit number which is calculated on the basis of a number of things in your report.


Related Article: Credit Bureaus in India


Sections of a Credit Report

⇒ Personal Information:
Very basic details about you like our name, date of birth, residence details, employment history, identification details are included in this section.

⇒ Public record information:
This section consists of the following details-
– Bankruptcies: Bankruptcy is a statue of a person or other entity that cannot repay debts to creditors. If you have ever declared one, it will show on your credit report.
– Tax Liens: Tax liens are filed by the government when you have not paid your taxes.
– Civil Judgments: Civil judgments are financial court judgments. If you were sued and you lost the case, then you owe a debt through the court.

⇒ Creditor information:
Every existing line of credit that is in your name is included in this section. Any credit that is turned over to a collection agency is also included. These are the following things that you might see in this section for each account-
– Status of the account, whether it is open, closed, charged-off
– The responsibility of the account, whether it is joint or individual
– Balance left in the account
– Recent transaction made from the account
– Past due information
– Credit limit of the account

⇒ Credit inquiries:
This section will describe individuals or businesses who have pulled and reviewed your credit report. It might include a bank at which you opened an account or applied for. there are two types of inquiries. There are two types of credit inquiries:

– Hard Inquiries:
This is made by lenders when you have applied for credit.
– Soft Inquiries: This is made when you check out your own credit report.


Related Article: Hard and Soft Credit Inquiries


Let’s decode

Sometimes there are also certain codes that are present on a person’s credit report. While you might not completely understand it. Here are some common status codes that you might need to know-

CURR ACCT Account is current, in good standing
CUR WAS 30-2 Account is current but was 30 days late twice
PAID Account balance paid off, inactive
CHARGOFF Unpaid balance charged off, credit grantor no longer seeking balance
COLLECT Account is seriously past due and has been sent to collections
FORECLOS Property was foreclosed
BKLIQREQ Debt forgiven
DELINQ 60 Account 60 days past due

Calculation of credit score

There are five factors that are considered while a credit score is calculated:

⇒ Payment history: How your payment history plays a huge role in the calculation of the credit score. If you make your payments on time and an in full, you will have a good credit score. If you make defaults, the credit score will definitely take a hit. Despite this, if you have a good overall history, a couple of defaults won’t matter.

⇒ Amounts owed: The amount you owe to lenders overall is also something that your new lender would be interested in. Thus, it is also included in calculating your credit score. Things like maxing your credit card, finishing only minimum payment and closing accounts might affect your score.

⇒ Length of credit history: Longer the credit history, more chances you have to show improvement or diligence. Therefore it is advisable to keep your oldest account live and active. Credit bureaus take into account how long you’ve been actively using your accounts while calculating your score.

⇒ Types of credit: If you think that closing an account would make the history go away, you could not have been more wrong. Closed accounts also show up in your report. Different types of accounts/loans/lines of credit appear in your credit history. A good mix is advisable for a good credit score.

⇒ New credit: Have you been applying to a lot of places for new credit? This might affect your credit score negatively. Too many hard inquiries on your accounts can lead to a drop in the credit score.

What’s Your Credit Score-Category

New to Credit

If you have just started your journey towards personal finance, you fall into this category. You have the golden chance to maintain a good credit score from the beginning itself. Get a credit card and pay your bills on time. This will help you build a good credit score. If you keep up with the good practices you will skip the next two categories and move to the last one directly.


Related Article: Why Is Your Credit Report Important?


Bad Credit: Credit Score less than 500

You have made a few (read too many) mistakes in your finances. Hence, you fall into this category. But as they say, better late than never. You can start improving your credit score today. Understand the reasons why your credit score went down and try avoiding them in the future.


Related Article: Things You Didn’t Know Affects Your Credit Score


Good Credit: Credit Score between 500-700

You have faired well in the test. You did most of the things right. If you keep up on the good work, you can definitely be the best. You can get credit from most of the lenders. But the offers might not be the best ones. So you can wait for sometime before you apply for credit. Work on improving your score. You are almost there.


Related Article: How Credit Cards Affect Your Credit Rating


Excellent Credit: Credit Score more than 700

As the name suggests, you have aced the credit game. You can get credit from any lender you want. You will get the best offers out there. Not only this, you can negotiate with the lenders for even better rates. Make the best of your credit score by applying for the most beneficial cards. Make sure to maintain this good credit score to keep enjoying the credit life.


Related Article: How Closing Credit Cards Affects Your Credit Score


There is no doubt that credit scores are crucial. Having said that, it is not very difficult to maintain them. Very simple practices can enable you to maintain a good credit score. Having a good credit score will enable you to get the most out of credit. We hope this article has made understanding your reports a little bit easier. Do let us know in the comments in case you have any doubts.


IndiaLends is a digital lending and borrowing marketplace that helps you connect with the best lenders based on your credit profile. We provide personalized personal loan offers, best credit cards, and free credit reports.

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