Your Credit Record: Report, History and Utilisation

A credit record is a file held by the credit information companies listing every credit commitment a household has, how each has been paid, and how much of any available limit is in use. The report is that file. The score is a single number computed from it. The report and the score differ, and only one of the two can be wrong in a way anybody can correct.

The common misunderstanding treats the score as the thing and the report as its summary. The order runs the other way. The report is the record. The score is computed from it afterwards by a rule somebody chose. A number produced by a rule cannot be argued with; a record can.

What is a credit record, and who holds it?

Start in a market lane. The grocer keeps a slate for the households he knows, and so does the milk supplier, and so does the tailor halfway down. Every slate is true and every slate is partial. A credit record is that pooling done deliberately: the credit information companiesLicensed businesses that collect account information from lenders and keep one file per borrower. The companies lend nothing themselves and decide nothing about any application. file what each lender sends in, and everything filed that way is the record.

A credit record is written neither by the household nor by the credit information companies, but by lenders reporting their own accounts, so it can only contain what a lender chose to send in. It is a copy of somebody else's books, so a mistake there becomes a mistake here. The record updates when a lender sends the next file. And an obligation with no lender attached never enters at all.

What is actually inside a credit record?

Five things, unequally interesting. Who the file is about. The lines: every commitment, open or closed, its limit and what is outstanding. The payment section, one mark per period a lender has reported. Everybody who has asked to see the file. And a place where a correction sits while it is checked.

The list of lines says what exists and the payment record underneath says what happened, so the section a household glances at is not the section carrying the weight. Thirty marks on a closed loan are thirty separate months of evidence.

What is Credit History, and is it a span or a rating?

Credit History is the length of time the record has been running, measured from the oldest line on it. The whole definition is a span, in months or years, arithmetic rather than judgement.

Two people go to see the same room to rent. One has lived in the city eleven years and can name four landlords. The other arrived in March. The second is not worse at paying rent; there is less to look at.

The Bhosale household, an invented family, took its card two years before year two began, and the card is the oldest line on its record. The record is therefore about three years old by the end of year two. The two-wheeler loan opened later, closed in January, and stays on the record as evidence of what happened while it was open. The pay later planA short instalment arrangement offered at the point of purchase, repaid in a small number of fixed amounts. A pay later plan is a credit line and is reported like one. is the newest of the three.

Credit History measures how long there has been anything at all to look at. A fact about time says nothing about how well anything was paid. A household with a short record often reads its own shortness as a verdict, when all it says is that the record started recently.

What is Credit Utilisation, and what sits in its denominator?

Credit Utilisation is the share of an available limit in use at the moment the balance is reported. The balance goes on top, the limit underneath, and the interesting half is the half underneath.

Three wrong denominators are worth naming. The month's spending gives a figure that moves for no reason. Income produces something that looks like a debt to income ratioMonthly payments measured against monthly income. A different measurement with a different purpose, covered separately. without being one. And one card's ratio is not the ratio across several.

Now the Bhosale household's own number. At the end of year two the card carried Rs 48,594/- against a limit of Rs 60,000/-, and 81.0 per cent of the limit was in use. Every rupee of that balance was groceries, school costs and fuel. The balance is there because the lane outside Ashok Bhosale's tailoring counter was dug up for drainage work for five months, and the counter took Rs 52,800/- across year two against Rs 96,000/- in year one, a fall of Rs 43,200/-. Nothing was bought that had not been bought the year before.

Credit Utilisation measures where a balance sits against a limit and nothing else. No such level is a fact, so no level of it is good or bad. It describes a line of credit rather than a person.

Why is Credit Utilisation read at a moment rather than across the month?

Because a lender reports a balance as at a date, not an average. The record receives whatever the account showed when the reading was taken, usually around the statement dateThe date on which a card issuer closes the billing period and produces the statement. The balance shown on it is the figure the lender has to hand..

Utilisation is a photograph rather than a film, so two households with identical spending can show completely different ratios purely because their readings fell at different points in their cycles. Clear the balance a week after the statement and a balance was still reported.

Three readings on that same limit are worth carrying away. At Rs 48,594/- the line reads 81.0 per cent, with Rs 11,406/- not drawn on. At Rs 30,000/- it reads 50.0 per cent, and at Rs 6,000/- 10.0 per cent. Every reading comes from one number moving against one that never moves.

What is Delinquency, and when does a late payment become one?

Delinquency is a payment overdue by enough that the lender reports it as overdue rather than as paid. The important word is reports. Being behind is a feeling; delinquency is an entry somebody has to make.

See stages rather than a line. A payment met inside its cycle. A payment late and caught before anything is reported. A payment late enough to be reported as missed. And a line left long enough that the status of the line itself is changed. Delinquency is a stage reached rather than a state of mind.

Where each of those boundaries falls, counted in days, is set in the lender's contract and in the reporting rules, both of which move. The boundaries are read in the agreement and at the Reserve Bank of India at rbi.org.in.

The Bhosale household has exactly one such entry. One instalment of Rs 4,000/- on the pay later plan was paid 40 days after it was due, drawing a late fee of Rs 500/-, and the provider reported it as missed. The instalment was late because the money was not in the account that week.

Credit Score vs Credit Report: which of the two can be corrected?

Take each on its own first. The report and the score differ in kind rather than in size. The report is the record: a dated list of lines, balances, limits, payment marks and requests to see the file. Two people reading it see the same facts.

The score is one number computed from that record by a rule. The score compresses everything the record holds into a single figure. A score is the output of a formula rather than a measurement of the household.

Now the contrast the whole subject turns on. The report makes statements that can be true or false, so a wrong one can be put right; the score makes no statement of fact, so there is nothing in it to dispute directly. Showing that a line marked missed was paid is an argument a record is built to lose.

The Bhosale household's score was 712 at the start of year two and 664 at the end. Two things behind that are on the record and nothing else on it changed: the reported card balance rose from nothing to Rs 48,594/-, and one instalment was reported as missed.

What does the record show that nobody mentions?

Three things on a credit record are neither a debt nor a payment. The first is the list of enquiriesA record that somebody asked to see the file. An enquiry says who asked and when, and is filed whether or not anything came of the request.. Every time a lender looks at the file, the looking itself is filed.

The second is closed lines. The two-wheeler loan finished in January and did not disappear: it stays as evidence of thirty payment periods, belonging to a debt that no longer exists. The third is the age of the oldest line.

A credit record is a file about credit rather than a statement of debt. A file like that holds facts that cost nothing and owe nothing. Reading it as a bill is the commonest way to misread it.

How does somebody assessing a household actually read one of these?

A clerk with a file open and four minutes to spend reads in a fixed order. Identity: is this file about the person in front of me. The lines: what exists, what is open, what is closed. The payment record. How much of the credit available is in use. And the enquiries.

The reader cannot see why any of it happened, and the why matters more than anything else on the file. The record does not show that a lane was dug up, that Ashok Bhosale's counter took Rs 43,200/- less across the year while Meghna Bhosale's salary did not move, or that the household ran a deficit of Rs 20,640/-.

What did the Bhosale household's record hold at the end of year two?

The whole file, as at 31 March of year two.

What can be wrong in a record, and how is a correction raised?

Five kinds of error turn up often enough to name. Two people with similar names get mixed together. A closed line is shown open. A payment that was made is marked missed. A line the household never took appears. And the quietest: a limit reported wrongly.

The wrongly reported limit deserves the arithmetic. Suppose the limit of Rs 60,000/- were reported as Rs 40,000/-. Not one rupee of the position changes, and the balance is still Rs 48,594/-. But the ratio now reads 121.5 per cent. An error in the denominator changes the reading without changing anything real. The limit is worth checking as carefully as the balance.

The route is the same for all five. A disputeA formal request to the company holding a record to check and correct an entry, which is investigated with the lender that reported it. is raised with the credit information company holding the record, and a copy is put right at the source, so the same correction is worth raising with the lender that reported the entry. Read the current process at the company and at the Reserve Bank of India at rbi.org.in.

The Bhosale household, Meghna Bhosale and Ashok Bhosale are invented.
Educational material. Not advice on any investment, tax, budget or market position.