Review your credit report before applying for a loan

Discrepancies in credit scores are often due to delay in updating the records by lenders, says Phil Nolan, managing director, Experian Credit Information Company

How does a person’s credit rating impact her chances to avail a loan?

A credit score or rating is a numeric representation of the risk grading of an individual based on information available with a credit information company. It is typically used by lenders within their credit assessment processes as a significant input to determine whether or not to extend credit or to determine the terms of credit to advance to an individual. While the lender may not take the decision only on the basis of the credit score or rating, a relatively bad score is very likely to impact a person’s chances to access credit. As markets grow in sophistication, the score may also be used for pricing decisions.

What are the factors that determine the credit score of an individual?

Factors including repayment track record across different credit lines, access to the credit market and leverage etc., determine the credit bureau score of an individual. The factors are derived out of the information in the credit information report and drawn out using statistical methods or experiential knowledge from operating in multiple markets.

What if a person has never defaulted on any loan or payment, but the credit bureau marks him as a defaulter?

It is advisable to approach the bank or a credit information company, such as Experian, for a copy of your credit information report. It will allow you to check your credit repayment history and check for inaccuracies, if any. If you find any discrepancy in the report, it is important to quickly raise the issue with your lender. Although we (Experian) cannot amend the data in the credit information report ourselves, we can do this with a written intimation from the lender. This is very useful if the incorrect data is impacting your ability to obtain a fresh line of credit.Your credit information report is a representation of the latest information provided by the members of the credit bureau. So the reason for a discrepancy is often the delay by the lenders in updating the payment records.

Your advice to individuals for improving credit score?

Loans should be taken responsibly. Always make your payments on time. If you cannot do this, contact the lender to discuss the available options. You should close all accounts that are not in use. Keep checking your credit information report regularly. It always makes sense to get a copy of your credit information report before you apply for credit.