My friend Arun who is a top official at a large brokerage firm was incensed with his prospective home loan lender. He had approached them on the advice of his colleague to whom the lender had given an excellent rate. While the lender was more than happy to give him the loan, they were offering him a slightly higher rate. When he enquired about the reason, he was informally told that his credit score was lower than his colleague and hence the higher rate.
He asked for and got a copy of his credit report from the prospective lender and confirmed that the credit report was in order and had correctly showed that he had paid all his dues on time. He had also requested his colleague to get the credit report from the same lender.
When Arun compared the two reports he was amazed that his credit score was lower than his colleague’s score. Hence, he called me to throw some light on the matter.
I asked him to take his colleague’s permission and send the two credit reports to me. The look at two reports was quite illuminating.
Both had excellent repayment records and good credit scores though his colleague’s score was little higher than Arun’s. The only visible difference was that Arun had about four credit cards (all showed an impeccable repayment record on the credit report) against only two credit cards for his colleague. However, a closer look revealed that there had been four enquiries for his credit report for a personal loan of `300,000 just four months back, though no personal loan showed up on his report.
When I checked with Arun, I was told that he was considering taking a personal loan for a foreign holiday but had ultimately dropped the idea. He had applied to four banks but ultimately did not take the personal loan though it was sanctioned. The banks, once they received the request from him for a personal loan, had sent a request to Cibil for his credit report.
The credit report also contains information about how many times Cibil got a request for the credit score of a particular person and for what products and amounts.
Now it is not known how Cibil exactly determines your credit score but a number of these requests within a very short span of time, especially for unsecured credit (indicating hunger for credit), can have a negative impact on the credit score.
So, at least for now I asked Arun to live with it (after all his credit score was not bad). But for the future I told him to be careful while shopping for credit. First make up your mind if you need credit or not before applying for it. Sometimes the sheer fact that you applied for credit (that you did not ultimately need) may result in a small reduction in your credit score even though you did not end up taking the loan.
These kinds of errors are to be reported immediately to Cibil and the concerned banks. The banks should be asked to get the records amended in Cibil records. If they do not respond to your request within a month, you should file a complaint with the banking ombudsman. A mistake in your credit record can prove very expensive, hence pursue these steps seriously.
You should apply for a loan or credit card only and only if you see no error in your Cibil report.
Once you get your credit report and it is error-free, you should go ahead shopping for credit card or a loan product.
But before applying for many of them to know more about the scheme aligned with them, you should always do some smart shopping online.
There are many price comparison websites like Apnapaisa that allow you to compare details about various credit products across various parameters.
You can compare various credit products and then apply only for the product that suits your requirement the best. This will ensure that only one bank makes an enquiry for you credit record, hence your high credit score can be safeguarded.
Credit Sudhaar is India’s first Credit Health management & improvement company whose goal is to help clients to Restore, Enhance and Protect their Credit and make them credit healthy.