Elements That Are Important In Your Credit Report


Credit Report
Credit Report

Elements That Are Important In Your Credit Report

Your track record of making repayments in the past, as reported by a variety of financial institutions and lenders, will play a role in determining this.  Your credit report contains details such as your personal information, an inquiries section, account details and a summary, as well as other information.

 

Usually, a person is better able to evaluate their own financial situation with the assistance of their credit report fetched from credit rating agencies in India, which is an important factor in the choice that a lender makes regarding any loan or credit card application. As a result, it is essential to keep a close eye on and evaluate your credit report at regular intervals from the main credit agencies, doing so at least once a year.

Let’s go over some of the most significant aspects of your credit report that you should be on the lookout for, regardless of which credit bureau’s services you choose to utilise.

What factors influence your credit score

  1. Payment history (35%)
  2. Amounts owed (30%)
  3. Length of credit history (15%)
  4. New credit (10%)
  5. Credit mix (10%)

Payment history

What it means: Whether you’ve paid past credit accounts on time.

How to master it: Make sure you pay every bill on time. This can be done by setting up autopay, alerts and/or calendar reminders. When you set up autopay, always set it for at least the minimum due. This keeps your account current and results in positive information being sent to the credit bureaus.

While you don’t have to pay your bill in full to master this factor (only the minimum payment is required), we encourage you to so you can reduce your amounts owed, which we explain next.

 Amounts owed

What it means: The total amount of credit and loans you’re using compared to your total credit limit, also known as your credit utilization rate.

How to master it: Try to maintain a low credit utilization rate below 10% (but not 0%), which is the threshold FICO “high-achievers” (consumers with credit scores 750 and above) sustain.

To find your credit utilization rate, divide your total balance by your total credit limit and multiply by 100 to get the percentage.

Let’s say you have two cards, the Citi® Double Cash Card with a $1,000 balance and $5,000 credit limit and the Blue Cash Preferred® Card from American Express with a $2,000 balance and $10,000 credit limit on each.

Combined, your credit limits across both cards total $15,000 and your combined balances equal $3,000.

Here’s the math: ($1,000 + $2,000) / ($5,000 + $10,000) = .20 x 100 = 20%

Length of credit history

What it means: The average length of time you’ve had credit.

How to master it: The main way to have a long credit history is to wait. The only way the length of your credit history will increase is by maintaining old credit accounts (and not closing your oldest credit card). It’s also key to be aware of how opening new credit accounts affects the average length of time you’ve had credit.

To calculate your length of credit history, add up how long all your accounts have been opened and divide by the number of accounts. For instance, if you already have a credit card that’s 10 years old and open a new one today, your average credit history is halved from 10 years to 5 years.

Here’s the math: (10 years + 0 years) / 2 cards = an average of 5 years per card

 New credit

What it means: How often you apply for and open new accounts that result in a hard inquiry on your credit report.

How to master it: When you’re looking to apply for new credit, consider whether a hard or soft inquiry will be performed. Hard inquiries may cause your credit score to drop a few points, though your score should recover quickly.

You can check if you prequalify for credit cards and loans without hurting your credit score. This allows you to shop around for the best offers without hurting your credit score.

 Credit mix

What it means: The variety of credit products you have, including credit cards (a type of revlving credit), installment loans, auto loans, mortgage loans and student loans.

How to master it: While there’s no clear-cut answer to how many different types of credit card accounts you should have, it’s a good idea to have more than one type. That may include a credit card plus an auto loan, mortgage or installment loan for your phone, to name a few.

Bottom line

No matter what credit score you have — whether it’s bad, fair/average, good or excellent — you should try to master the five credit factors. If you follow the tips we provided above, you can improve your credit score over time and maintain a healthy credit history. And when you do build up to a good or excellent credit score, you’ll be able to enjoy many financial milestones, such as buying a home or purchasing a car.

Reference number

In the event that you come across any questions or inconsistencies in your credit report, you will be required to present this number to the credit bureau of India in order to get the matter rectified.

A summary of the credit accounts

Because it contains information about your loans and credit cards, this area of your report put together by credit rating agencies in India is the most significant part of the document.

 


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