What is a Credit Report?

If you are readying to get yourself a car loan or house loan, pulling up a credit report before going to the bank would help. Before I tell you why it's helpful, let me tell you what is a credit report?

When an individual goes to bank to avail of a loan (or even a credit card), the bank needs to know if the individual will repay the loan. The bank need to verify if the individual has taken any prior loans and how his repayment behaviour has been till date.

This is where credit bureaus come into the picture. A credit bureau is an organization that keeps a record of every credit facility that has been provided by a bank, and the repayment track record of the same. In India, there are 4 credit bureaus. They are CIBIL (the oldest), Equifax, Experian and HighMark.

Every bank in India is required to submit the details of loans, credit cards, overdraft accounts and other credit facilities they have provided to customers, along with the repayment history of the same to the credit bureau. The credit bureau keeps this information with them in a easily accessible format. This is also called the Credit Information Report ( or CIR or simply credit report)

The following details would be covered in a credit report.

When an individual, lets say, Ramesh, goes to ICICI Bank for a home loan, ICICI Bank will ask the credit bureau for Ramesh's credit report. The credit bureau will pull the records of all credit facilitites Ramesh has availed of across any bank in India. The credit bureau also sends across Ramesh's repayment history for each loan. Moreover, the credit bureau also provides a score which tells how good a customer Ramesh is. Generally a score of 750+ is considered to be a good score and banks wouldn't have a problem giving a loan to such a customer, provided other conditions are met.

As you can see, your credit score is an important parameter which is checked before a bank sanctions a loan. However, sometimes because of some issues with data entry or because of human error, wrong data may end up in a credit bureau, which might negatively affect your credit score. For example, if you have paid off a loan in the past, but this information has not reached the credit bureau, then it is possible that when you apply for a new loan, the application may get rejected since the data shows you have a loan that you haven't repaid.

Therefore it is very important to keep track of your credit score and to ensure that the credit details in your credit report are correct.

Now that you know what a credit report is, don't you think it would be good if you could access your credit report to see if all your data is being captured correctly?
Good news is you can access your complete credit report for free! Click on this link to know how!