Credit Report Terminologies
Learn the basics of credit score terminology with IIFL Finance. Understand key terms and concepts to effectively manage your credit and make informed financial decisions
Monitoring your credit score has become increasingly vital in today's times. Fortunately, checking your credit score, including your CIBIL score, has become quick and convenient. However, whether you're applying for a personal loan or reviewing your credit card statement, you may need clarification on terms. So, to effectively manage your credit, it's crucial to have a clear grasp of certain basic credit terminologies, including the basics of credit score.
What Is A Credit Score?
Your credit score reflects your creditworthiness, similar to a batting average in cricket. A high credit score indicates responsible borrowing and repayment, making you more eligible for loans with better terms. It determines the loan amount, interest rate, and potential risk for lenders.Are CIBIL Score and Credit Score The Same?
The two terminologies, though indicating credit rating, have different meanings. CIBIL stands for Credit Information Bureau (India) Limited, one of India's four licensed credit bureaus. Any of these four bureaus can provide a credit rating, and CIBIL score meaning the rating that CIBIL provides. When talking about 'how to read CIBIL report', the 3-digit score provided is between 300-900, where a score of 700 and above is considered healthy.What Are The Other Terms Related To Credit Score?
Account Status:
The account status shows if a credit account is open or closed and reflects your payment behavior at the time of the last update.Revolving Account:
It is a credit account like a credit card with a set credit limit that allows carrying a balance and accrues interest. Monthly payments, in this case, are based on the outstanding balance.APR:
The APR (Annual Percentage Rate) is the yearly interest charged on unpaid dues. To calculate the monthly interest rate, divide the APR by 12.Inquiries:
Credit inquiries happen when lenders or credit agencies review your credit history to evaluate your creditworthiness when you apply for credit.Charge-Off:
A credit report charge-off means the lender has deemed a debt uncollectible, negatively affecting your credit score for up to 7 years.Promotional Block:
A promotional block on a credit report temporarily prevents new charges or transactions on an individual's credit account, usually for a specific period or security reasons. It doesn't impact the CIBIL score for personal loans.Principal Balance:
The principal balance is the outstanding amount on the loan, excluding interest and fees. To clear the loan, you must pay the principal amount with interest.Credit Limit:
The credit limit is the maximum amount of credit available to you from a card issuer, determined by factors like income, credit score, and repayment history.Resolving Account:
The outstanding amount or issue has been settled or fixed when an account is resolved. This can happen through full payment, payment agreement, or dispute resolution. The credit report is updated accordingly.Installment Account:
An installment account is a loan or credit arrangement where the borrower repays the debt in scheduled payments over time.
Credit is simpler than it first appears to be. These fundamentals help you to better understand your credit report, credit score meaning and related terms. And if you are seeking to finance your dream project with a trusted partner, look no further than IIFL Finance for business and commercial loans.
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