Your credit details play a key role in your financial future. A credit report is a peep into the state of your finances. Prepared by the major credit bureaus, this report is an individual’s credit history containing all the important information. This report is also the basis of calculating your credit score, an important parameter that helps lenders determine your creditworthiness and repaying ability. It is suggested that you read, review, and monitor your credit report often to check for any errors, recent account updates, changes in the credit score, etc. To do the same, it is vital to know what is a credit report and its main constituents.
What is a Credit Report?
A credit report is a detailed information of your credit history. It records the loans you have taken, all the credit cards you own, your EMIs and bill payment history, etc. To access your credit report, you can connect with your credit bureau. The credit agency collects the credit information from different lenders, adds it to the credit report, and assigns a three-digit credit score number!
What are the components of a Credit Report?
So, what is a credit report comprised of? There are various sections in a credit report. Though the categories and format may differ with the credit bureau, the general compilation includes the following sections:
1. Personal Details
You will find your personal account details in this section of the credit report. The section includes information like your name, current address, previous address, phone number, Social Security number, birth date, current employer, previous employers, etc.
2. Account information
This section of your credit report lists all your accounts. Each account has a small synopsis containing the name and address of the creditor, account number, date opened, account status (open or closed or transferred), whether you are still paying, etc. This category in the credit report also clarifies the account type – whether it is a credit card or a student loan, etc. You will also see whether it is an individual or joint account. The credit limit, credit balance, loan repayment information, etc., are also listed.
3. Days Past Dues or DPD
DPD or ‘Days Past Dues’ is your credit payment deadline. If you miss or delay your payment, your credit health suffers, and the report reflects the same. You can see a remark or a number. If there has been a week’s delay, you will see that your DPD is updated in a seven numerical number. When there is no default, you can still see a numeral or a comment in the form of ‘XXX’ or ‘000’.
4. Credit Score
A credit score is a three-digit number representing your financial wellness. Depending on the credit bureau, the number can range between 300 and 900. Lenders consider your credit score before approving a loan and determining your interest rate. A credit score between 300 and 579 is considered Poor. The score between 580 to 669 is Fair. 670 to 739 is a Good credit score. The score above 740 and below 799 is Very Good. Lastly, A score of 800 to 850 is considered exceptional. ({replace} a score between 800 to 850 is Exceptional.)
5. Credit Enquiry
The credit report also contains the individual’s inquiry information. There are details of both hard and soft inquiries. While you make a soft inquiry, the inquiries made by external credit is the hard inquiry. The prospective lenders initiate a hard inquiry after receiving your loan approval application. A soft inquiry does not affect your credit score, but a hard inquiry does. Multiple hard inquiries or too many credit requests can lower your credit score.
6. Remarks
The remarks section in the report based on your account status is crucial. Some comments that you may find in your credit report include:
Settled: This debt settlement remark conveys that you have partly paid the dues to settle your outstanding. This is a negative remark that bad your credit score.
Closed: The account is updated with the ‘closed’ status when the loan is fully paid. The individual can also expect a ‘No Dues Certificate’ or closure letter.
Written Off: When the borrower cannot pay the outstanding loan or credit card amount and 180 days have passed, the remark ‘written off’ is updated. This negative note hurts your credit score substantially.
Post Write-Off Settled: This comment also reflects debt settlement after updating the credit account as written off. This one seriously impacts your credit score and makes it extremely challenging to get credit in the future.
Wilful Default: A wilful default remark is updated when the borrower chooses not to pay the loan, even when they can. Such negative remarks are for the individuals who use loan funds for unfair purposes. Other than tremendously denting the credit score, such borrowers may face legal action.
7. Public Records
Your report also includes public records like bankruptcies, foreclosures, repossession, etc. All of these serious delinquencies can take your credit score down.
Wrapping up
Now that you know what a credit report and its inclusions are, it is imperative to read it often for credit monitoring. Tracking your report from time to time will ensure accuracy. You can immediately identify the discrepancies or mistakes in the report and highlight the same to the credit bureau. If you find your credit score unsatisfactory, you can devise ways for credit improvement. Duefactory can help you with credit counselling. Trust us for a satisfying credit journey!
FAQs
Q1. How can I see what my credit report contains?
Ans.You can request your credit reports directly from the credit bureau. Alternatively, some personal finance or credit repair sites like DueFactory provide credit reports.
2. What does a credit report include?
Ans. Credit reports include your personal information, account details, credit inquiries, remarks, credit score, days past dues, etc.
Q3. What are soft and hard inquiries? What is its impact on the credit score?
Ans.When you apply for a loan, the lender asks for a copy of your credit report to determine your credit repaying ability, called “hard” inquiries. A request to get your credit report is a soft inquiry. Lenders can see all the “hard” inquiries on your credit reports and “soft” inquiries are visible to only you. Soft inquiries do not affect credit scores; hard inquiries can drop your score.
Q4. What are the credit score ranges?
Ans. A credit score between 300 and 579 is considered Poor. The score between 580 to 669 is Fair. 670 to 739 is a Good credit score. The score above 740 and below 799 is Very Good. Lastly, a score between 800 to 850 is Exceptional.