What is an Equifax credit score?
Equifax is one of the certified credit rating agencies in India that provides credit scores and credit reports for individuals and businesses organizations. A credit score is a three-digit number between the range of 300 to 900. This number is allotted to a person or business entity based on their detailed credit history recorded by the credit rating agency.
Why is an Equifax credit score important?
A credit score is one of the first reference points that is reviewed by lenders when a person or an entity applies for a loan of any nature or a credit card. The minimum credit score preferred by the lenders is 750 and more depending on the guidelines of the lenders for their respective products. A favorable credit score is one above 750 which helps the applicant get timely access to credit without any hassles or extra cost.
If the credit score of the applicant is closer to 300, such applicant is considered to be a high-risk applicant with a higher possibility of default or delay in the repayment of the credit provided. The lenders may therefore not approve the loan application or the credit card application of such applicants. Hence, it is important to maintain a healthy credit score to ensure that the applicants get immediate access to credit to meet their financial needs.
What are the details mentioned in the Equifax credit report?
The Equifax credit report contains detailed information about the credit history of the applicant. This includes various components which are highlighted below.
1. The credit score of the applicant
The Equifax credit score as mentioned above is a three-digit number ranging between 300 to 900. This credit score is derived based on many factors like the credit applied by the applicant, the repayment history, the number of hard inquiries made by the lenders, etc. This credit score is the reflection of the creditworthiness of the applicant in the eyes of the lenders. Hence, it is better to keep checking the credit score before applying for any credit and also correcting any errors that can damage the credit score.
2. The personal information of the applicant
The personal information of the applicant is also included in the Equifax Credit Report. The information provided under this section includes,
- Name of the applicant
- Address of the applicant
- Gender of the applicant
- Contact information of the applicant (telephone number, mobile number, etc.)
- Employment information of the applicant
Lenders also get access to the employment information of the applicant when they apply for any loan or credit card with any bank or other lender. This information is then passed on to the credit rating agencies and included in this portion of the credit report. This section includes information is related to the current employment, annual, or a monthly income of the applicant as reported by the member lenders.
3. Account information of the applicant
This section of the credit report is allotted for the account information of the applicant which relates to the details of the credit sanctioned to the applicant in the past. The information under this section includes,
- Type of credit availed
- The account numbers
- The current balance of the applicant
- The repayment for the credit and defaults or delays if any
4. Enquiry information by lenders
Under this portion, the credit rating agencies include the details of the hard enquiries made by lenders when the applicants make any loan application or a credit card application. The credit report includes
- The nature of the credit applied
- The amount of credit applied
- The frequency of application
- Rejection of application if any, etc.
What are the factors affecting the Equifax credit score?
There are multiple factors that affect or contribute to the calculation of the credit score of a person. Some of such factors are mentioned below,
- The credit utilization ratio of the applicant
- The type of credit availed by the applicant
- Repayment history of the credit taken by the applicant
- The current debt levels of the applicant
- The duration of the credit
- Any new credit application made
How can a person improve the Equifax credit score?
There are many ways to improve a person’s credit score in order to be eligible for good credit options from multiple lenders. Some of the most common measures to improve the credit score of a person are mentioned below.
- Ensuring the payment of the credit card dues or loan EMIs on time
- Prompt payment of the past credit card dues or loan EMIs to reduce the liability of the applicant
- Ensuring that there are no simultaneous applications for loans or credit cards through multiple lenders at the same time.
- Ensuring that the credit utilization ratio is kept in check and avoid utilizing it beyond 30-40% of the total credit limit (as it is often considered to be the ideal credit utilization ratio).
- Ensuring that the external liabilities are significantly reduced.
- Prompt reporting of any errors or fraudulent entries in the credit report to present the true credit history or record of the applicant.
How can a person apply for the Equifax credit score?
The applicants can review their credit scores for free at least once every 12 months as per the mandate of RBI in this regard. The applicant will have to register with the Equifax portal for the same and make an official application with the bureau for getting the credit score. Applicants can also make a subscription to get their credit scores at regular intervals to keep their credit scores in check.
Alternatively, a person can also check their credit scores by checking them through the lender or through many online portals providing free credit scores to the applicants.
Equifax credit scores are an important parameter accessed by the lenders while reviewing the loan application or credit card application of a person or business organization. An ideal credit score accepted by the majority of lenders is 750 or more. A better credit score will benefit in getting better loan options at competent interest rates as well as a higher credit limit on credit cards. Hence, applicants have to take measures to maintain a good credit score and avoid any action that may damage it or have an adverse impact on them.
It is an established fact to maintain the credit score of the applicant to get multiple benefits. However, there are some common mistakes that can affect the credit score of the person negatively. Some of these common practices are mentioned below.
a. Overutilization or 100% utilization of credit limit, i.e. beyond the preferred limit of 50% maximum.
b. Failure to report any errors and fraudulent charges in the credit report of the person.
c. Simultaneously and frequently applying for multiple credit cards or loans.
d. Frequent hard enquiries about the person’s credit score by lenders.
f. Frequently or consistently paying only the minimum amount due on credit cards
g. A persistent delay or default in payment of credit card dues or loan EMIs
h. Closing an older credit card
i. Making cash withdrawals against the credit card.
Credit score of a person is always checked in considering any loan applications by the lenders. Some of the benefits of having a better credit score in such cases are mentioned below,
a. higher credit score will ensure faster approval of the loans and credit cards
b. Some lenders may also consider the applicant for a higher amount of loan due to a better credit score.
c. higher credit score will ensure that the applicant can get the loan at a relatively lower rate of interest.
d. It also gives the applicant an opportunity to negotiate the processing charges levied on the loan
The list of documents needed for checking the credit score of the applicant through an online portal are mentioned below,
b. Driver’s License
c. PAN Card
d. Voter ID
e. Ration Card
The minimum credit score preferred by the majority of lenders while considering a loan application or a credit card application is 750.
Yes. Prepayment and part payment of loans have a positive impact on the credit score of a person and can increase it while a settlement of loan adversely affects the credit score of a person and will contribute to reducing it.