A credit report is a statement that records all your credit history and contains your credit score. When you take a loan or make payments using your credit card or repayments, these transactions are recorded in the report. While it makes things easy for organizations to gauge your creditworthiness, the credit report can be confusing for a regular person as it is filled with various terminologies and terms that are legible only to trained financial professionals. While you can check your credit report online, a CIBIL score app is also a handy tool to see your credit history.
Essential Terms on Your Credit Report that You Need to Know
Listed below are the explanations of some of the essential terms that you must know:
Your credit score is the total value given to your creditworthiness by considering all activities in your credit history. When you make loan and credit card repayments on time, you get a positive score, while delay or failure in refund leads to a negative score. All these transactions are taken together and finalized into the credit score. A good score means many lenders will offer loans to you at lower interest rates. In contrast, a bad score means few lenders will agree to provide loans, and those who agree will do so with high-interest rates.
Trade Lines are like an accounting record of your credit history. They include details such as the amount of credit, repayment history, and opening and closing dates. All your lines of credit, such as loans or credit cards, are recorded as a Trade Line on your credit report. To be eligible to have a credit score, you need to open at least one Trade Line in your name. When you approach lenders to apply for a new line of credit, they can review the Trade Lines to check your reliability as a borrower.
The function of a Credit Status is to ascertain if a loan or credit has been repaid on time, has outstanding payments, or has been closed due to full repayment or written off as a loss. Every Trade Line has its Credit Status.
- Current- The line of credit is open, and no outstanding payments exist.
- Delinquent- The line of credit is open, but there are one or more missed payments, incurring late charges and interest.
- Paid- This means the line has been closed with full payment.
- Written-Off- This means the account has been closed with outstanding payment. This is a severe red mark and will heavily decrease your credit score.
Annual Percentage Rate
The Annual Percent Rate is the total payment you must make over a year. This is the actual payment amount, including your Interest Rate and other fees like Taxes and service charges. While taking a loan or a credit card, lenders usually only reveal the Interest Rate and keep the additional charges hidden. Always remember to check both the Interest Rate and the Annual Percentage Rate before you apply for a new line of credit. Using the CIBIL score app can help you understand the actual Annual Percentage Rate you are paying for your lines of credit.
A Credit Inquiry is a credit check request by an organization to a Credit Bureau like the CIBIL score app. Lenders conduct such inquiries to check your creditworthiness before sanctioning new loans or credit cards. Credit Enquiries have two different forms: Soft Enquiries and Hard Enquiries. A Soft inquiry only accesses your basic credit details, like your credit score. In contrast, a Hard inquiry accesses your credit history and all records. When a Hard Inquiry is performed, it also leaves a record in your credit history.
A credit report is a document holding your credit history and score. It helps lenders to assess your creditworthiness and influences your eligibility for future loans. The availability of loans with reasonable interest rates is directly proportional to how high your credit score is. The CIBIL score app is available on your mobile app store if you want to check your credit rating. You must keep yourself informed about credit-related terms so you can analyze your credit report on the CIBIL score app without any professional help. Keep reading WishFin to stay updated on more financial information.