How Credit Bureaus Gather and Compile Credit Information: Behind the Scenes
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Your credit score plays a significant role in the approval and rejection of your credit card and loan applications. This three-digit number represents your creditworthiness and repayment capability. The credit score is computed by a credit bureau on the basis of multiple factors including your credit history, record of repayments, and so forth.
But hold on a second. Do you know how a credit bureau functions? How does your credit information reach the authorities? And How is your credit report created? Let us answer all these questions, one by one. 
What is a Credit Bureau?
Before getting into the technicalities involved in the calculation of your credit score, let us first learn a bit more about credit bureaus. Credit bureaus in India are called Credit Information Companies (CIC). These are licensed by the Reserve Bank of India. These firms are tasked with recording and maintaining the credit information of individuals and businesses. Some popular credit bureaus operational in India include TransUnion CIBIL, CRIF High Mark, Experian, Equifax, and CRISIL. 
These firms were first established with the objective of improving the functionality of the Indian financial system. They were tasked with maintaining stability in the system by containing Non-Performing Assets (NPA). With this, the bureaus also look to enhance the portfolio quality of credit providers.
How Does a Credit Bureau Create Your Credit Report?
On a periodic basis, a CIC collects credit information from lending institutions across the country. This data pertains to the repayment of all types of loans and credits of businesses and individuals. The information allows the firm to create a precise representation of an individual’s credit history. This data is gathered from multiple lenders and put together to create your credit report.
This report consists of your credit score, which is a numeric representation of your creditworthiness ranging between 300 to 900. The figure will be lower if you have missed your instalments, have too many debts, and so on. Following this, the credit score is used by various lenders to assess your repayment capabilities when offering a loan or a new credit card.
What Does Your Credit Report Contain?
A credit report includes information regarding all your credit accounts. The data includes the type of account you own, the date on which you opened it, and even your credit limit. Furthermore, your payment history and account balance are also some bits of data gathered and recorded in your credit report. This means that your report has a complete record of all your borrowings and repayment activities on loan and credit accounts.
The Role of a Credit Report and a Credit Score
Your credit report and credit score play a significant role in determining the financial aspects of your life. This impact is not limited to just getting an approval for your loan and credit card applications. It can also have a huge effect on your employment. In some cases, employers might check your credit score during the job application process. Similarly, in some countries, landlords look at your score prior to giving you the property on rent. 
Additionally, a credit report helps track your liabilities, which is represented in the form of a score. Getting a credit monitoring service along with the usual credit score checks can help you understand your finances better and plan your future accordingly. With proper vigilance and management, you can make informed decisions and invest your money well to fulfil your short-term and long-term goals. 
How to Improve Your Credit Score?
Credit score has a major impact on all your credit activities. Therefore, it is essential to improve your score to get the maximum available benefits from a loan or credit card. In order to do so, here are some tips and tricks to build your credit score.
1. Timely Repayments
Your repayments have a direct impact on your credit score. It is important to repay your instalments on time without any delays to boost your score. To ensure this, you can set reminders so that you do not miss any deadlines.  
2. Managing Loans and Credit Cards
Maintaining your existing credit cards and loans, rather than closing them early can help increase your credit score. Timely repayments over the entire tenure lengthen your credit history and provide the required assurance to lenders of your creditworthiness. While closing these is also an option to save up and manage your finances, continuing them over a longer tenure will establish your repayment capabilities. Hence, if you are looking to get more loans and credit cards in the future, it is advisable to maintain your existing credit. 
3. Correction of Errors
It is possible that despite having paid all your EMIs on time, it is not recorded in your credit report. This can cause serious damage to your score. Hence, it is important to keep a close eye on your report and immediately contact the credit bureau’s customer care in case of any errors.
Use these simple tips and tricks to ensure that your credit score is always on the higher side. Through this, get great deals when applying for a loan or a credit card and enjoy the benefits.
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