written by | March 29, 2022

Importance of Credit Information for a Fresh Borrower

When you look at your credit report for the first time, it's reasonable to be intimidated by the amount of information shown to you on the screen. As a result, dealing with many loan accounts or credit cards over an extended time may be problematic. Many people have colleagues or acquaintances who brag about having significant credit card limits or taking out a large loan to acquire a good piece of real estate.

Big businesses, builders, project employees, and anybody whose employment needs a significant financial investment are all covered. There has to be a more compelling reason why banks are willing to accept such considerable credit card limits and large loan amounts in the first place.

The following is a concise summary of the answer: a metric used to assess one's financial situation is the worth of an institution determined by the credit score of a potential client. Because of this, financial institutions must keep it in mind at all times, even while making decisions. Borrowers' credit histories and credit ratings are used to determine whether or not they will be awarded loans or be authorised for credit cards.

Credit reports contain both benefits and downsides, so it's crucial to understand what they are and how relevant they are before using them for anything.

Did you know?

A creditor can check your previous credit history when you apply for credit.

What Is The Process Through Which A Credit Report Is Generated?

A credit report is a record of how you've handled your credit in the past, as well as how you're now dealing with it.

Realising that your credit score is a statistical representation of your capacity to repay a loan is crucial to managing your finances. Your credit report contains information about your credit score. This information is critical for lenders because it helps them determine whether or not to give you money, how much interest they will charge you, and whether or not you will be required to put up any kind of collateral.

Credit Information Bureau (India) Limited (t) is a credit reporting company owned by TransUnion Credit Information Bureau (India) Limited, with the other three credit reporting organisations being Experian, CRIF Highmark, and Equifax.

Each of these agencies is responsible for maintaining a comprehensive record of all customers' credit histories, mainly derived from information given by lending institutions. Visitors to their websites may check their credit scores online simply logging on to their respective websites on the Internet.

Also Read: Importance of Credit Rating in India

Data and CIC Scores

CIC score is responsible for storing and calculating credit information and ratings (Credit Information Companies). As a result of this permission, the Reserve Bank of India (RBI) has given these organisations the right to collect and analyse information on corporate credit risk.

Since 2009, the Reserve Bank of India (RBI) has granted authorisation to four organisations to run credit information firms in India, following the 2005 Credit Information Companies Act, which the Indian Parliament enacted. In 1982, CIBIL (Credit Information Bureau (India) Limited) was established as India's first and oldest credit information agency, becoming the country's first and oldest credit information bureau.

Credit information companies (CICs) often relate a company's (or an individual's) total credit limit to the company's (or an individual's) spending and saving habits. Depending on the scenario, CIC point calculation results might range from 300 to 900 points in some instances. This is referred to as the CIBIL TransUnion score, or the credit score, in various contexts. By clicking on the URL given, you will be able to see your CIBIL Credit Information Report on your computer or mobile device, as appropriate.

Information That Your Credit Report Includes

Unless otherwise specified, a credit report will typically comprise the following sections:

  • Personal information importance about a person comprises their name, birth date, postal address (if they have more than one), and any other information related to their bank accounts (including email address).
  • Additionally, the credit information you supply will contain information on your current and prior credit accounts, such as loans, mortgages, and credit cards.
  • There is also a list of any debts that are past due. And these have been sent to a collection agency by the lender to recover the outstanding debt payment.
  • A list of foreclosures, bankruptcies, liens, and civil proceedings that have emerged from this case will be maintained on this website.
  • Suppose any lenders or credit card firms have recently inquired into your credit history. 

What is the Significance of Your Credit Report to You?

Your credit report, which is available to the public, comprises objective evaluations of your financial stability, also known as creditworthiness. A person's credit score is presented on their CIC report in the form of a number value, which represents their creditworthiness. 

When you have a history of loan defaults or missing credit card payments, as well as late payments and a high debt-to-income ratio, you are more likely to have a poor credit score. 

If you pay your bills on time, return your loans on time, have no history of late payments or default, and have a low debt-to-income ratio, it is realistic to anticipate a good credit score from your financial institution.

Ways to Improve Your Credit Score

You may improve your creditworthiness in various ways that are simple to implement.

  • Create periodic payment reminders to guarantee that your payments are received on time.
  • Try to keep your debt-to-income ratio (credit usage) at no more than 30%, if not a lower proportion.
  • Reduce the number of new credit applications that are submitted.
  • Utilise outdated credit and debit cards to establish a more extensive credit history in the long run.
  • Create a credit limit that is specific to your needs and wants.
  • Long-term loans are a helpful alternative for many people.
  • Take care of any missing payments that may occur.

Significance of a Credit Rating

People who already have credit cards or loans are responsible enough to make their payments on time to prevent having their credit ratings negatively affected. 

The ability to make appropriate judgments about when to pay off credit cards or loans is required regardless of how many credit cards or loans a person has had in the past. Every purchase and every repayment has an impact on one's credit rating.

Although credit ratings are significant, it is easy to claim that they are only meaningful when you are actively utilising a loan or a credit card to make payments. The reality is that this is not the case. In addition, even if you have never incurred any obligations, it is feasible to establish and maintain a credit history. One's credit score is determined by several things: how effectively they handle their own money.

Also Read: What differentiates your credit score from the CIBIL credit rank?

Your Credit Score and Information Concerning Your Creditworthiness

To calculate credit ratings, information, and history, CIBIL depends on the information provided by financial institutions, which is known as third-party information. These reports are available to other financial organisations and the general public.

An initial credit report from a CIC score should be obtained at least six months before applying for a line of credit from any financial institution by the new borrower. A first-time borrower who discovers any discrepancies in their historical financial statements will be able to rapidly rectify the situation by making timely payments and paying off any outstanding obligations. 

Also included is an indication of how responsible a person or company is regarding the credit score and other information. Credit ratings and records may be tarnished rapidly and are tough to recover; nevertheless, being financially responsible helps avoid any further complications concerning the credit score or past.

Conclusion

As a first-time borrower, credit card information is one of the simplest ways to improve your CIC score and ensure your financial future. The most common means of getting a pre-approval letter is through the mail.

Banks often exchange credit card information to acquire new clients or reinforce current ones. These are relatively common, but they should not be overlooked since various effective treatments are available.

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FAQs

Q: What is the significance of credit card info?

Ans:

Credit information is the most crucial element of obtaining a loan in the financial world. 

  • When applying for a loan, your creditworthiness is the first thing a lender checks. 
  • If you have a low score, you will be turned down. 
  • It is essential to monitor your credit score regularly. Having a high score will help you get the financing you need.

Q: Is it true that having excellent credit means you're a low-risk borrower?

Ans:

Having good credit is an excellent indicator of responsible money management. It helps you get the best possible terms on loans and credit cards. It can save you money in the long run. However, bad credit can hinder your chances of getting a loan or credit card. You may need to spend some time repairing your credit and paying down your debt.

Q: How to know my CIC score?

Ans:

The following are the steps to verify your CIC report in banking while employing your PAN Card:

Once you've made your purchase, you'll be able to choose the method through which you want your score and report sent. You have the option of having a tangible copy of the document shipped to your address, or you may decide to get digital written information via emails.

Q: What is the CIC score?

Ans:

CIC score means the credit information companies (CICs) often link the entire load available credit of any organisation (business or person) with their budgeting habits. The resultant score might range anywhere from 300 to 900 points, depending on the situation. This is referred to as creditworthiness, also referred to as the CIBIL TransUnion Score.

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