Credit score secrets: What loan agents won’t tell you about your credit report

Credit scores have now become the cornerstones of financial health in the country. Especially since the recent regulatory changes and developments mandating more frequent updates, closer checks, stricter scrutiny.

Loan agents and financial institutions often focus on the headline numbers only still, there are critical details about your credit report that are rarely discussed by borrowers.

These details can make or break your entire loan application. Therefore, credit score is extremely important for loan eligibility still there are several other factors that cumulatively influence loan or credit card applications.

Discussing the same issue with Mint, Raj Khosla, Founder & MD, My Money Mantra believes, “When you apply for a credit, loan agents often promise instant approvals and attractive terms. However, they don’t tell you how your credit score plays an important role. Understanding your credit score can help you get better rates on loans and more conducive terms. Apart from that, lenders also check repayment history, credit utilisation, job stability and number of recent credit inquiries.”

Faster credit report updates: What it means for you

Recently, the Reserve Bank of India (RBI) has mandated credit bureaus to update credit reports every 15 days. This is a significant shift from the previous monthly cycle. This means that both positive and negative financial behaviours such as paying off a loan or missing an EMI are reflected much quicker now.

Now given this allows for faster corrections and quicker personal loan approvals still it also means that mistakes or missed payments can influence your score almost instantly. Loan agents may not always share and highlight how swiftly your credit profile can change and how important it is for you to carefully monitor your credit report consistently.

The hidden factors behind loan rejection

A high credit score, for example a score of over 750 is not the only factor financial institutions and lenders consider while releasing loans. Long agents often never discuss factors such as repayment history, credit utilisation, job stability, number of recent credit inquiries along with past defaults if any.

For example, even if your credit score is above 725, which is a reputable score for most unsecured loans. Still, having several hard inquiries in a short span of time or even high credit utilisation can still result in a rejection. Furthermore, missed personal loan EMIs or bounced payments in the last six months are red flags irrespective of the overall score.

What your credit report doesn’t show

Most of the borrowers are completely unaware of the fact that their credit report does not include details about investments, savings accounts, utility bill payments or loans from informal lenders.

Loan agents may never explain to you as a borrower that your income or employment status, unless mentioned in a loan application, is not part of your credit history. This simply means that your financial stability, as reflected by your savings or investments, does not directly influence your credit score.

Why should you check your credit report regularly?

Mistakes and errors in credit reports are more common than most people realise. That is why a wrongly reported late payment or an unpaid loan entry which isn’t yours can wreak havoc on your credit score.

Due to the same frequent checks are crucial as these mistakes can now be corrected at a much faster rate. Especially thanks to the new 15 day update cycle. Loan agents may not emphasise this but proactive monitoring can result in saving you from unexpected personal loan rejections and high interest rates.

Disclaimer: Mint has a tie-up with fintechs for providing credit; you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit scores. Mint does not promote or encourage taking credit, as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.