Introduction

Credit score can be defined as the creditworthiness of a person coded into a 3-digit number. Credit score is one of the determining factors for the approval of a loan or credit card application. This score is affected by a range of factors such as payment and borrowing patterns, the number of credit card or loan applications, credit utilization and so on. A credit score is primarily based on a credit report information typically sourced from credit bureaus.

Product Description

  • A Credit report which includes a person’s credit history with the detailed information of his/her credit accounts and loans, bankruptcies and late payments (if any) apart from their personal information is called a credit report. It is issued by licensed Credit Information Companies.

  • Complex mathematical algorithms are applied to the client’s records, submitted by member banks and credit institutions, to arrive at a credit score and also to publish the credit report.

5 Key Factors of a Credit Score:

  • 10% Credit inquires

  • 10% Account mix

  • 15% Credit age

  • 30% Credit utilization

  • 35% Payment history

Features

  • A complete analogy of concerned individual’s financial report: To determine an individual’s credit worthiness, view other loan status and review missed/late payments

  • One Place for all: To analyse all credit, loan and defaulted accounts under one platform

  • Making effective lending decisions: By checking the credit worthiness of the borrower and inversely inducing a healthy nature within the corporate borrowers.

Usage

  • One of the most important factors considered by banks when deciding about your loan or Credit Card application.

  • Credit Score determines the interest rate banks chalk up for you.

  • Banks and credit card companies, use credit scores to evaluate the potential risk posed by lending money to consumers and to mitigate losses due to bad debt.

  • Credit scoring is not limited to banks. Other organizations, such as mobile phone companies, insurance companies, landlords, and government departments employ this technique.

  • Credit scoring has much overlap with data mining, which uses many similar techniques.

Process

  • For Credit score, Individual provides Permanent Account Number(PAN) and other demographic details(name, gender, address & date of birth).(name, gender, address & date of birth).

  • According to RBI, every financial institution is expected to send the financial data of the individual on a monthly basis to credit bureaus (CIBIL, Experian, Equifax and High Mark).

  • These credit bureaus review the financial data that is useful for the credit score.

  • All the bureaus have a standard procedure to formulate the credit score, no matter from which bureau you’re receiving the score, it will have the importance as the other.

  • The credit score report will generate the following information:

    Credit Score: This section indicates about your credit worthiness.

    Personal Information: This section has your personal details as reported by any of your lenders.

    Enquiry Section: This section contains details about all the enquiries made about you from different lenders.