The Credit Bureau or TransUnion CIBIL Limited is the first ever Credit Information Company in India. It collects and maintains the records and payments related to non-individuals’ (commercial entities) and ‘individuals’ in terms of credit cards and loans.These records are sourced by lenders and banks on a monthly basis, based on which the Credit Score and Credit Information Report (CIR) is developed. This information enables lenders to assess and approve (or disapprove) loan applications. Licensed by the RBI, a credit bureau report can make your break your dreams of taking an auto loan. Here are 5 important things to know about CIBIL or car loan credit reports.
1. Know and check your credit report regularly
It is recommended that you request a copy of your credit report from a credit bureau approximately 6 to 8 months prior to applying for an auto loan. This will give you a reasonably long window to improve upon your credit score and know where you stand with respect to it. Check for all inaccurate information, and get them rectified at the earliest.
2. Why is your credit score important for loan approval?
In case of a low credit score, your loan application will not be processed further by the lender and will get rejected right away. As your credit score would work as the first impression for your car loan lender, the higher it is the better are the chances of your application getting approved. Do know that CIBIL has no further say in the matter and it is entirely up to the lender to decide if your car loan should be sanctioned or not.
3. What does a credit score of NA or NH mean?
Your Score of “NA” or “NH” would mean one of the following:
- You have no past credit history and are new to the system,
- You lack credit exposure,
- You have not had any credit activity in recent years.
Though your scores of “NA” or “NH” may not attract negative reviews from lenders, some of them may be prevented from providing an auto loan to you as per laid down policies. In such a situation, it is best to apply for your loan elsewhere.
4. Should you keep on applying for credit if rejected?
Even though you may enquire, ‘Why have I been refused credit?’ it is a good idea to refrain from applying for another auto loan right away. All credit applications made by you – regardless of whether they are successful or not – would reflect on your credit file. Also, applying for several car loans in a short span of time may make lenders believe that you are desperate to avail cash; this in turn may inflict more damages on your credit rating and affect the interest rates that will be chargeable to you in future.
5. What are the factors affecting your credit score?
Utilization of credit limit - While high usage of your credit limit may not affect your score adversely, it does indicate increased repayment burdens and poor credit behavior.
Payment history - Poor payment history affects your credit score negatively. Defaulting on EMIs or dues, or making late payments (consistently or recently) depicts your struggle with existing credit obligations.
Percentage of personal loans / credit cards – A balanced ratio of unsecured loans (personal loans, credit cards) and secured loans (auto loans, car loans) will create positive impacts on your score.
New accounts that have been opened recently – If multiple credit cards and loans have been sanctioned against your name recently, then your application will be viewed with caution because your debt burden has magnified.
Don’t worry in case bad credit or poor CIBIL score results in your auto loan getting disapproved. There are different ways of rebuilding your score and availing a new auto debt later on.