Credit Report Vs Credit Score: If you are thinking of taking a new loan or credit card and your credit score is above 750, then this is definitely good news. But having a good credit score alone does not guarantee loan approval. Banks and financial institutions check your credit report equally seriously before approving the loan. This is why it has become important for every borrower to understand both credit score and credit report.
In India, major credit bureaus like CIBIL, Experian, Equifax and CRIF High Mark collect data related to borrowers. On the basis of this data, credit report and credit score are prepared, through which banks assess your creditworthiness.
What is a credit report?
A credit report is a detailed record of your entire credit history. You can call this your financial diary, in which it is recorded which loans and credit cards you have taken till now, whether you made the payment on time or not, and whether any mistake has been made anywhere.
Credit reports include the following information
- Personal Details: Name, Date of Birth, PAN, Address and Contact Information
- Credit Accounts: All loans and credit cards, their limits, outstanding amounts and repayment deadlines
- Payment History: Delay in EMI or Bill, Missed Payment, Default or Settled Account
Hard Enquiry: Credit checks done by banks and NBFCs - From credit report, banks understand how you have managed money in the long run and how strong is your ability to repay the loan in future.
What is credit score?
A credit score is a 3-digit number (300 to 900) that summarizes your entire credit report. The score is based on factors such as payment history, credit utilization, tenure of old accounts and new credit applications. Generally a score of 750 or above is considered good. On such a score, loan and credit card approval becomes easier and sometimes lower interest rates can also be available. At the same time, if there is a delay in EMI or credit card bill, the credit score can fall rapidly.
Why just 750+ score is not enough?
Often loan takers assume that having a good score will automatically give them the loan. But even though banks may first shortlist the applications on the basis of score, the final decision is taken only after looking at the credit report. For example, if the report shows recent defaults or repeated delays, there are too many hard inquiries i.e. you have applied for loan at multiple places in a short period of time, there is an old disputed or settled account, then the bank can reduce the loan amount, increase the interest rate or even reject the application.
Why are both necessary for loan applicants?
The credit score gives an immediate indication to the bank whether the borrower is risky or not. At the same time, the credit report gives the bank a complete picture of how much is the debt compared to your income, what is your payment habit and what is the possibility of default in future. That is why for a strong financial profile, it is important to always pay EMIs and credit card bills on time, do not overuse the credit card limit and check your credit report at least once a year.
Overall, credit score is a quick indicator of your credit health, while credit report tells the whole story. For easy loan approval and better terms, it is important to pay equal attention to both. Timely payments and regular monitoring are the real keys to a clean credit profile.
