What are the critical factors in your credit information report?

What factors on my credit information report (CIR) are the most critical to my loan approval?
CIRs have been widely used by lenders to evaluate loan applications for over 5 years. However, only recently have people begun to realise how crucial it is to be aware of, and maintain their credit history.

Understanding the CIR helps you identify the right time in your financial life cycle to apply for a loan and increase your chances of a loan approval.

The most important attributes looked at by a lender while evaluating your application are:
-Payment history
This appears in the account(s) section of your CIR. There are two pieces of information: the Days Past Due (DPD), and the month and year of payment that reside here. The DPD indicates how many days the payment is late that month.

Anything other than “000” is considered negative by a lender. Up to 36 months of this payment history (with the most recent month displayed first) are provided in this section.

-Current balances
Also appearing in the account(s) section of your CIR, the current balances on various loans indicate the depth of your debt. The sum of your current balances helps a lender determine your strength to take on additional EMIs, in relation to your current income. Naturally, lower the current balance, the better the chance of your loan getting approved.

-New credit facilities
If a lender observes that you have recently been sanctioned a number of new credit facilities, it would mean that your monthly outflow in terms of EMIs are likely to have increased. Hence, it may have a negative impact on your loan application.

-Number of new enquiries
If you have applied for a number of loans in the recent past, the chances of your loan getting approved are likely to suffer —such behaviour indicates that you are “credit hungry” and implies you are in an urgent need for money. It is likely to make lenders more cautious while evaluating your application.

If you are planning to apply for any sort of credit facility for a purchase (home or car) in the near future, it is imperative to check your CIR 3-4 times each year and ensure that your ‘reputational collateral’ is reflected accurately. This will provide you with access to credit faster and at better terms. And rest assured that enquiries are not added to your CIR when you purchase one directly from a credit bureau.

The writer is senior vice president-consumer relations, Cibil and may be reached at creditwise@cibil.com