It is vital to have a clean and healthy credit report in order to qualify for the best loans available at the best rates. Your CIBIL™ Score guarantees that you get favorable deals and interest’s rates on all loans and credit cards.
Your credit score is a three-digit number that expresses your creditworthiness. It’s based on your credit history, which is derived from information in your credit report’s ‘Accounts’ and ‘Requests’ sections. It usually falls between 300 and 900. The closer your credit score is to 900, the more likely your loan application will be approved. A high credit score also guarantees credit at competitive rates.
CIBIL™, Equifax, CRIF High Mark, and Experian are the four authorized credit bureaus in India. An individual is entitled to one free credit report per year. You have the option of requesting a credit report and credit score from each of the four credit bureaus.
How do I read my Credit Report?
There is a lot of information in a credit report. At first glance, it may appear to be too technical for your eyes. It is, however, simple to decipher once you are familiar with the report’s various terminology.
To increase your credit score, you must first understand your credit report. There are a lot of terms on your credit report that may not understand. Today, we’ll go through three main words from your credit report’s “Accounts” section that you should be aware of.
What Do The Terms ‘Closed’, ‘Settled’ And ‘Written Off’ Status In Your Credit Report Mean?
The “Status” of your account can be found in the “Accounts” section, which also describes its “health.” The following are the most commonly used words in this section:
Closed: Closed basically means that the loan account has been paid off and is no longer available. To put it another way, it means you’ve paid off your loan and the bank has reported the account to CIBIL™ as “Closed.”
When closing the loan, make sure to get a No Dues Certificate (NDC) or Closure Letter from the lender. Remember to follow up with them to get the status on your credit report updated to “Closed.”
Settled: When the borrower is unable to pay the dues on a particular loan, he may strike a deal with the lender to pay a part of the loan, or a reduced amount, to settle the loan or credit. Such loans are reflected as ‘Settled’ on your credit report. When you settle an account, it means the creditor agrees to accept a settlement payment that is less than the original balance owed. A status of “settled” can be regarded as potentially negative and harmful to the chances of loan approval because the lending institution is taking a loss.
While the “Settlement” flag may not affect your credit score, your credit history will display a “Settled” status on your CIBIL™ Report, and there will be ‘Days-Past-Due’ reflecting on the report because the loan payment was not made on time. Each bank has its own policy about how a “Settled” status is treated and will decide on potential loan applications based on that policy.
Even so, most lenders would look at a settled account favorably rather than one that is past due and has an unpaid balance. Before you can qualify for a loan, it’s a good idea to pay off or settle any unpaid debts.
Written Off: When you have been unable to make payments on an unpaid loan or credit card balance for more than 180 days, the lender is entitled to “write-off” the balance. The lender then reports this as “Written off” on your CIBIL™ Report. This can hurt the chances of getting a loan or credit card because a lender may be reluctant to give a loan or credit card to someone who hasn’t paid their bills on previous loans or credit cards.
Here are a few points to keep in mind regarding your credit score
- Check your CIBIL™ score or credit score on a regular basis to ensure that the report contains correct details. If you notice any errors or omissions, you can fix them right away so that they don’t impact your CIBIL™ score.
- Avoid defaulting on your payments; Keep track of all of your monthly payments to make sure they’re paid on time. Even if it is a legitimate omission, missing payments have a negative impact on your credit ratings. To ensure that monthly EMI payments are made on time, you can use resources such as auto-debit, standing orders, or NEFT mandates. If you’re paying by check, make sure you send it in well ahead of the due date to allow for the clearance period.
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