Credit Bureaus - What Do the Credit Bureaus Do?

Have you ever tried to find out your credit score? If yes, did you check your scores on different sites on the same day? If not, just try it once, and it is likely that you would experience something strange - you may get different scores on different websites.

Are you confused? Worry not. We are here to clear your confusion. Let's start off with the very concept of a credit score.

What Is a Credit Score?

A credit score is an indicator of an individual's financial stability. Whether you are applying for a loan or a credit card, this three-digit number carries a lot of significance. This numerical value is determined based on your financial (credit) history, and it depends on the following factors:

• History of debt repayments
• Total debt of the customer currently
• Credit available to him/her
  

A credit score ranges between 300 and 850 or 900. If you have a high credit score, you will find it easier to get loans approved. You may also get better interest rates on loans.

What Is a Good Credit Score?

Usually, if the score is more than 700, it is considered to be a  good credit score. The closer you are to the highest score (900), the higher the chance of approval for your loans. Given below are the industry-specific scores:

Poor - 300 to 579

Fair - 580 to 669

Good - 670 to 739

Very Good - 740 to 799

Excellent - 800 to 900

What is a Credit Bureau?

A credit bureau is a data analytics agency that researches and collects the credit history of an individual, generates the credit score, and sells it to banks, other financial institutions, and directly to customers as well.

Credit Bureaus use proprietary algorithms to calculate your score. Though this may vary marginally form one bureau to another, it is generally similar so as to maintain some semblance of uniformity.

How Do Credit Bureaus Get Your Information?

Aren't you intrigued about how these credit bureaus generate your credit score?

Financial institutions supply information about your credit dealings to credit bureaus. This information is in turn utilized to calculate a numerical score. Banks and other credit institutions regularly report to credit bureaus so that credit reports prepared for each individual is up to date.

Why Does Your Credit Score from Different Bureaus Vary?

Credit scores matter a lot to your financial well-being, especially while applying for credit cards or loans . There are a few reasons why your credit scores vary from bureau to bureau.

• Each bureau has its own algorithm to generate these scores.
• Lenders report credit information to the bureaus at different times, and hence, some financial information might not be updated with all bureaus simultaneously.
• A credit bureau may store or display the same information in different ways.
  

How Many Credit Bureaus Generate Credit Scores?

The following are the four most popular and best credit monitoring services in India:

• Equifax
• Experian
• TransUnion (CIBIL)
• CRIF Highmark
  

Equifax

Established in 1899, Equifax is the oldest of all the credit bureaus, and is  one of the largest credit bureaus in the USA. In India, it was licensed by the Reserve Bank of India (RBI) in 2010. The credit range is 300-900, 900 being the highest. A score of more than 700 is considered good.

The cost of the report is Rs.400 (excluding GST) for credit report and credit score. The credit score generated by Equifax is as good as the other bureaus. mymoneykarma provides you the Equifax credit score for free.

Experian

Headquartered in Dublin, Experian was established in 1996 and is a leading global information services company. RBI licensed it in 2010.

Experian initially offered a different score range but later on adopted the range of 300-900 as directed by the RBI. A credit score of 700 and above is considered good. The cost of the report is Rs.399 for credit report plus credit score.

TransUnion

TransUnion Limited was founded in the year 2000. It is India’s leading credit information company and is popularly known as CIBIL. The score ranges between 300-900. A good credit score would be 700 and above. The report costs about Rs.550 for credit report plus score.

CRIF Highmark

Highmark or High Mark Credit Information Services is another popular credit bureau in India that maintains record of every individual’s and organization’s credit information. Based in Mumbai, the Credit Information Company was founded in the year 2005.

Besides collecting credit information, it also offers credit reports and score to its members and individuals. It helps lenders and financial institutes gauge risk-profile of individuals and organizations before approving their loan applications.

The credit score ranges between 300-900. A good credit score would be 700 and above. The report costs about Rs.399 (including GST) for credit report + credit score.

All these credit bureaus provide online credit reports, delivering instantly once payment is made.

Where to get your credit report from? - Where do CIC’s get all your information from?

You may already know by now, but it begs repeating, especially when there is information which is not given elsewhere on the web.

You can get your credit report from the three main credit bureaus in India, who are also called Credit Information Companies or CICs.

Now, not all CICs offer you your report for free. There are some from whom you’ll need to buy it.

However, every single time lenders want to check your credit score, they have to pay a fee.

Needless to say, lenders check your credit score every time you apply for a loan or credit card.

Where do CIC’s get all your information from?

You may now be wondering where on earth these CICs get your information from.

Well, that’s no mystery.

They get your financial and personal information from the various financial institutions like banks from whom you have taken loans, or have applied for one.

Credit reports allow lenders to minimize defaults in repayments by knowing beforehand who has a bad credit history. Even though your credit score is not the only factor in getting a loan, credit reports do have significant weight and are considered to determine your eligibility.

Why are they so important?

Credit Scores are important both for you and the lender, as we have discussed earlier.

For the lenders, it is a measure of your creditworthiness.

Having a high score means you have a healthy and consistent repayment habit, while a low score indicates the opposite.

What are they used for?

Credit reports tell lenders how creditworthy you are.

For lenders, your creditworthiness is perhaps one of the most important factors. After all, they’re more likely to give you a loan when they are sure of your ability to pay the loan back, in time and with interest.

If a person has a low credit score, it means he or she is not very creditworthy. Most lenders won’t want to risk their money on them. And even if people with low credit scores get loans luckily, such credit shall be accompanied with pretty high interest rates and long repayment periods, which means you’ll end up paying a whole lot of money just because you are plagued with a poor credit score.

Because of this, it is much better to improve your credit score before asking for credit. Those with high credit scores get the best loans and credit cards

What Is a Credit Score? - 6 credit bureaus in India

A credit score is the measurement of your creditworthiness, which means your ability to pay back loans on time.

It is a 3-digit number representing your ability to pay back loans. Its range starts from 300 and ends at 900. You should always and constantly strive to get the score closer to 900 because that’s when you’ll get the best loans.

When we say best loans, we mean the credit cards with a large credit balance, loans with low interest rates, friendly and flexible terms, and more. When your score is closer to 900, it shows lenders you have been a responsible borrower, and giving you a loan won’t be risky for them.

Conversely, the further you are from 900, expect less loans to be given. This is because a low credit score shows you were not a responsible borrower. Perhaps you had:

• missed payment 

• defaulted on a loan

• taken too many loans within a short time

By the way, when we say try getting your score towards 900, understand you cannot realistically reach 900. No one has. The maximum you can hope to reach is around 850, which is an excellent score by the way.

Credit scores are calculated by entities called credit bureaus.

There are 6 credit bureaus in India:

1. TransUnion Credit Information Bureau (India) Limited 

2. Equifax

3. Credit Rating Information Services of India Limited 

4. CRIF High Mark

5. ICRA (formerly known as Investment Information and Credit Rating Agency of India Limited)

6. Experian

Equifax, TransUnion, and Experian are the three main ones. They take into consideration several factors like your credit history, number of credit inquiries, repayment records and others.

Your credit score is checked by banks other lenders whenever you apply for a loan or credit card. They check your creditworthiness every time before giving you loans and credit cards.

The higher your credit score, the better your loans are, and vice versa. High credit score enables you to get discounts and preferential pricing on interest rates, which people with low score can’t hope to get!

If you have a high score, you can use it as a bargaining chip while shopping for credit. Lenders will give you high preference over others.

 

Credit Builder Loans - What are the many types of credit builder loans?

Credit lines in our lives are very important. In many cases, it is essential. Credit is needed for almost anything: from buying a dream home, going on that foreign vacation you have always wanted, to give a much-desired family tour to your loved ones, to enjoy your life, to meet medical and monetary emergencies. The list goes on. There is no end to the benefits which a loan can give you. Anything expensive nowadays requires getting a loan.

Why is credit score important?

Just like credit is important, credit score is much more so. Credit score is a numerical representation of your previous credit behavior. It refers to how you had handled your previous loans. Did you pay on time, or were you always late?

Your credit score is given by the credit bureaus. A credit score is in the range of 300 to 900. The closer you are to 900, the better loans and credit lines you can get. A high credit score tells of your high credit worthiness, which in turn refers to lower risk for loan providers.

While you may understand how important credit score is now, perhaps some of you have a bad credit score. A bad credit score is below a certain level, due to which you may not get good loans or any loan for that matter.

If you want to buy a good product with a loan or credit, you may get disappointed and frustrated to know that lenders will not give you this.

However, there is good news. Credit score is not constant, and therefore can change for the better too! Your credit score is a number that changes according to your credit actions.

How to increase your credit score?

If some of your credit actions have resulted in the score sliding down, it can also rise up with the right credit actions. All you need is responsible and right behavior. Soon you will see your score going up again. Here are some of the most common things you can do to improve your credit score again.

• Be regular with your existing loan and credit products
• Repay outstanding loan balances
• Focus on keeping credit utilization ratio low
• Get a fair mix or secured and unsecured loans
• Do not suddenly close off your old credit accounts
• Limit credit applications
  

As you can see, most of the options given above work for those who are pre-approved for credit products already. However, what about those who still find it hard to get any credit or new loans approved due to existing low credit scores? How can they get their scores up?

In this article, there are answers for that as well. Mymoneykarma is here to guide you to achieving the perfect credit score. Here is one good option for those with low credit scores, and who wish to build up the score: credit builder loan.

What is a credit builder loan?

A credit builder loan is one which is especially designed to cater to the needs of those seeking to improve their low credit scores, and for those who are new to credit.

How do Credit Builder Loans work?

Someone who has no or low credit score finds it hard to get any kind of loan. When they ask for loans, lenders tell them to get a good credit score first. However, the only way to get a higher score is by getting loans in the first place. So this vicious cycle just goes on and on. Fortunately, we have credit builder loans.

While there are other options like fixed deposits and secured credit cards, credit builder loans are the best, since in case of the other options a person may not have any securities to deposit for getting loans. In such situations, a credit builder loan is very useful. Even a Gold Loan can be used as credit builder loans.

The main idea behind this financial instrument is to lend out small amounts that people can pay back easily in a short time, and therefore increase creditworthiness.

Credit builder loans are designed by and are available at many banks and other financial institutions. Here is how to get these.

Approach a credit lender who offers these

Since you do not have an existing credit profile, or a bad one, the lender will see other points like social media profile and bank transactions to build up your credit profile, to help them making a decision to lend

• At times, banks may insist on lending just to those who have a account with them to reduce their own risk
• These loans are similar to personal loans, but the amount can be available since the loan is very small
• The tenure is shorter than normal personal loans, and ranges from 6 months to 1 year
• Once the bank disburses the loan, you have to start making regular EMIs
• When you pay regular EMIs, credit bureaus notice that and make improvements on your credit score

How to Remove Negative Remarks from Your Credit Report

What Are These Negative Remarks?

A negative detail on a credit report indicates that an individual didn’t pay loans or bills for a long duration, thereby breaching the terms that were agreed upon while borrowing.

Where Do They Come From?

A negative remark can come on a credit report through three avenues:

   Banks and other financial institutions report negative information to the credit bureaus, which are then reported as a disparaging remark.

   Credit bureaus add public records such as bankruptcy in the credit report.

   Errors in the credit report: Mistakes in payment dates, account status, date of loan closure, etc.

Now, let’s discuss some of the frequent financial events that generate them:

Late Payments - If you have missed one or two payments, it stays as a minor form of negative record on your credit report. But if you delay payment every month, the severity of remarks will invariably increase.

Debt Settlement - If your account has been reported as delinquent, it will be mentioned negatively on your credit report even if you manage to settle the debt with the lender.

Foreclosure - A foreclosure happens when you fail to pay mortgage EMIs, after which the bank attempts to force a sale of the house that was used as collateral for the loan.

An Account in Collections - When a creditor comes to believes that you will ultimately not pay what you owe them - usually after consecutive missed payments - it can mention the account as ‘charge off’ for tax purposes. After a creditor has charged off, it will sell your account to a collections company to get a payment from you.

Bankruptcy - If your case has been filed as bankruptcy, the negative information on your credit report will never be removed. Even if your debts are discharged in bankruptcy, the balances will be reported as 0. This negative record will be visible as a black spot on your credit report for not less than a decade.

How Long Do They Stay?

Generally, for events such as foreclosure or late payments, negative remarks blemish a credit report for almost seven years, continually serving as a reminder of poor credit history. However, in the event of bankruptcy, it can stay for up to 10 years.

How Do They Affect You?

It damages your credit score

Your credit score will slump based on the severity of negative remarks on your report. For instance: A ‘late payment’ remark would affect your score less drastically in comparison to a ‘foreclosure’ remark.

Lenders won’t trust you

Negative remarks will taint your credit report for up to seven years, giving potential lenders a red signal that you can’t be trusted. They will either give you a lesser amount than requested or will charge a higher interest rate to compensate for the risk they are taking in lending money to someone who has a history of questionable credit behavior.

What Can You Do About It?

Monitor your credit report

Start checking your credit report regularly, so that if you come across any errors or an unexpected drop in your credit score, you can work on the problem at the right time. For checking your credit report for FREE, use mymoneykarma's intelligent finance tool.

Verify the age of the debt

Negative records normally get removed after seven years in most of the cases. However, if it doesn’t, then you may have to directly request the credit bureau to delete it.

Report the errors in your credit report

In case you are not at fault and have become a victim of mistakes committed either by the lender or the credit bureau, take prompt action accordingly.

Work on improving your credit score

Removing negative remarks from your credit report is not a one-day task. But as they say, time heals all wounds.

Start taking baby steps to improve your credit score either by clearing the due credit card payments or by paying more than the minimum due amount. With time, these steps can repair the impact of negative remarks on your credit report.

What is a Credit Builder Loan? - Credit Builder Loan

Credit lines in our lives are very important. In many cases, it is essential. Credit is needed for almost anything: from buying a dream home, going on that foreign vacation you have always wanted, to give a much-desired family tour to your loved ones, to enjoy your life, to meet medical and monetary emergencies. The list goes on. There is no end to the benefits which a loan can give you. Anything expensive nowadays requires getting a loan.

Why is credit score important?

Just like credit is important, credit score is much more so. Credit score is a numerical representation of your previous credit behavior. It refers to how you had handled your previous loans. Did you pay on time, or were you always late?

Your credit score is given by the credit bureaus. A credit score is in the range of 300 to 900. The closer you are to 900, the better loans and credit lines you can get. A high credit score tells of your high credit worthiness, which in turn refers to lower risk for loan providers.

While you may understand how important credit score is now, perhaps some of you have a bad credit score. A bad credit score is below a certain level, due to which you may not get good loans or any loan for that matter.

If you want to buy a good product with a loan or credit, you may get disappointed and frustrated to know that lenders will not give you this.

However, there is good news. Credit score is not constant, and therefore can change for the better too! Your credit score is a number that changes according to your credit actions.

How to increase your credit score?

If some of your credit actions have resulted in the score sliding down, it can also rise up with the right credit actions. All you need is responsible and right behavior. Soon you will see your score going up again. Here are some of the most common things you can do to improve your credit score again.

• Be regular with your existing loan and credit products
• Repay outstanding loan balances
• Focus on keeping credit utilization ratio low
• Get a fair mix or secured and unsecured loans
• Do not suddenly close off your old credit accounts
• Limit credit applications

As you can see, most of the options given above work for those who are pre-approved for credit products already. However, what about those who still find it hard to get any credit or new loans approved due to existing low credit scores? How can they get their scores up?

In this article, there are answers for that as well. Mymoneykarma is here to guide you to achieving the perfect credit score. Here is one good option for those with low credit scores, and who wish to build up the score: credit builder loan.

How Often Do Companies Report to Credit Bureaus?

 Credit Scores Come from Credit Reports

The very first thing to understand is that credit score comes from credit reports. Yes, credit reports are the only place where you can find the scores. You get the report once a year from special bureaus like Equifax, Experian, and TransUnion. Just apply to them, and you should be getting the report within a few weeks.

However, do remember that these get updated weekly and even several times daily. This is why it is essential to know how long it takes for a credit report to be updated.
When Do the Lenders Report to the Credit Bureaus?

This is one confusing question that bothers everyone. And most annoyingly, this question does not have an answer. There is no such rule or law that insists upon a particular date for the lenders to submit their records to the credit bureaus. However, there are patterns that one could observe to understand the trend of a lender’s reporting habits.

Typically, the card-issuing companies report to the credit bureaus on your statement closing date. The credit bureaus can take up to a week to update this information. The three main bureaus - Equifax, Experian, and TransUnion, follow different timelines. They update your information at different times, speeds, and frequencies.

On the other hand, there isn't a hard-and-fast rule that your financial activities would be reported to the bureaus positively at the end of your billing cycle. It's mostly at the discretion of your card-issuing company. The company could report your information daily, weekly, monthly, or even quarterly. However, the popular trend is that the lenders report it at least once a month.

The credit bureaus do not insist that all lenders submit the information within a particular date every month. Each lender adheres to its schedule. Hence, your credit score is in constant flux. It can change at any moment - within days, or even within hours — as and when various lenders supply information about your credit activity.

How Often Are Credit Reports Updated?

It would be interesting for you to know that Experian, one of the most significant credit bureaus, takes care of more than 220 million credit reports. That’s a lot, right?! Now, once the score or transaction is reported, updates to the credit report happen quite fast.

However, this update is not in real-time. This is because Experian has processes in place dedicated to making sense of the information, correcting errors, following up, etc. It is essential to know how often your credit scores and credit reports change.

Equifax, another major credit bureau, takes care of 210 million credit reports a year. When new financial information is received, the report is updated within three days. Well, now you know how long it takes for a credit report to be updated.
Lenders Don't Need to Report to Credit Bureaus

In case you are striving to boost your credit scores and improve your credit health before making a large purchase, you would need to ensure that a positive credit history is reported.

But here’s the catch: All lenders do not report your activity to the credit bureaus. Even if they do, they don't need to report to all the credit bureaus. Credit reporting is entirely a voluntary practice. Credit card companies do it so that they can gauge the consumers’ creditworthiness, and they don’t necessarily reveal which credit bureaus they report to. Therefore, it is ideal for you to keep your credit score in good standing at all times.

When the credit bureaus receive your information, they typically amend your credit report right away. They recalculate your credit score immediately. If you've been maintaining a favorable status quo, then one untimely payment won't make much difference in your credit score. However, in case you miss a payment or cause a delay for more than 30 days, you will find a considerable drop in your credit score.

Monitor your credit report - Reasons Why You Should Monitor Your Credit Report

Consolidated record of your finances in a detailed document is called credit report.Credit bureaus like Equifax, Experian, and TransUnion maintain this record. They evaluate your financial information to calculate your credit score, which is a numerical score that decides your creditworthiness.
 
Based on your credit score a potential lender can know how trustworthy your to get a credit or loan.you should have a habit of monitor your credit at least once a year.

Reporting Errors :

Credit Report errors are quite common and Your card-issuing company might make mistakes while filing your report with the credit bureaus.

Here are a few common errors that you must look out for:

1. A new address or phone number that is not yours
2. Error in the spelling of your name
3. Unknown accounts owned by someone with a name that’s similar to yours
4. The same debt or payment failure note listed multiple times
5. Incorrect dates
6. Mistakenly reported delinquency or late payment
7. False record of the current balance
8. Incorrectly recorded credit limit
9. Closed accounts that are marked as open
10. Accounts appearing various times with different creditors listed
11. Unauthorized accounts
12. Statements in which you are an authorized user, but you are marked as the primary user.