What factors on my credit report are the most critical to my loan approval?

CREDIT REPORTs have been widely used by loan providers to evaluate loan applications for over 5 years.  However, only recently have people begun to realize, how crucial it is to be aware of and maintain their credit history. Understanding the CIBIL credit report helps you identify the right time in your financial life cycle to apply for a loan and increase your chances of a loan approval. Listed below are the most important attributes looked at by a Loan provider while evaluating your credit application.

•  Attribute 1: Payment History
  This appears in the Account(s) section of your CIBIL credit report. There are 2 parts to this 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 Loan provider. Up to 36 months of this payment history (with the most recent month displayed first) are provided in this section.
   
• Attribute 2: Current Balances
  Also appearing in the Account(s) section of your credit report, the current balances on various loans indicate the depth of your debt. The sum of your current balances helps a Loan provider 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.
   
•  Attribute 3: New Credit Facilities
  If a loan provider 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.
   
• Attribute 4: A 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. Simply because, this credit behaviour indicates that you are “Credit Hungry” and in an urgent need of money. It is likely to make Loan providers more cautious while evaluating your credit 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 CIBIL credit report 2-3 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. Rest assured; that Enquiries are not added to your CIBIL credit report when you purchase one directly from a CIBIL.