Credit Score vs Credit Remarks: Which Matters More?

Most of us are well aware about Experian reports and score. It keeps your whole financial record from your credit cards and the loans you have availed to your repayment schedule and defaults. These rating agencies have various clients like banks and other financial institutions. They provide their customer’s all information to these rating agencies.

An Experian report means a detailed credit report comprising of credit remarks, payment history, and Credit Score. There are other credit information organizations as well. Generally, credit report and credit score provided by these firms are almost similar with minor differences.

Thinking of raising a loan for business purpose, new home, or car?

Credit score seems to be really important. A credit score of minimum 700 or 750 appears to be the key to get loans approved by the lenders. However, a credit score does not guarantee loan approvals or a high credit limit. There is one more crucial element involved in getting your loan approvals. This element is a credit remark and it is based on your credit reports.

Credit score

A credit score is a 3-digit number that indicates your credit worthiness. This number lies between 300 and 900. Credit score gives a picture of your credit behavior to the lenders. A low credit score or credit rating represents that chances of default in making payment are high.

There is no particular cut off score as such. A score more than 750 is considered to be a good score. It is used for small businesses as well as individual consumers. Credit rating and credit scores, both represent a borrower’s likelihood of repayment without any defaults.

Credit remark

You can think of it as a smaller statement or it could even be only a single word comment on borrower and borrower’s loan. This remark is made by the creditor for credit rating agencies. Many creditors look for these remarks as the tell so much about you than a simple credit score. In spite of a good credit score, there’s a huge number of loans getting rejected every year due to an unfavorable credit remark.

Suppose you have credit facilities of a personal loan and a credit card. In this case, credit report would reflect remarks for both of these accounts and their current status. In case you are closing your personal loan having remarks like ‘settled’ or ‘written off’, it is considered as derogatory or negative. These are an indication of your default in payment. They also indicate that you have settled the account with a lesser amount.

In case you opt for settlement of your balance with your bank, the term ‘settled’ may affect your future loan applications. In spite of having a good salary and a tremendous credit score, you may not succeed in availing a loan. If the remark written states ‘closed’, it is a good sign.

Your credit report has an ‘account information’ section wherein you can find all the credit remarks. It is one of the most crucial sections of your credit report. It contains the information of all your credit cards and loans. It provides account status along with its details such as lender or creditor’s name, type of credit facility (home loan, credit card, personal loan etc.), account no., type of ownership (guarantor, joint, or single), account opening date, record of payments, overdue amount (if any) and current balance.

There is also a Days Past Due (DPD) Section. This section provides information on how many days later the payment was done. The types of categories for this section are Standard (STD), Sub-Standard (SUB), Special Mention Account (SMA), Loss (LSS), and Doubtful (DBT). You may sometimes observe a ‘XXX’ in your DPD section, signifying that your creditor bank has not yet conveyed information for that month to credit agencies such as Experian, Equifax, Highmark, CIBIL, etc. An important point to remember is that any classification other than ‘000’ or ‘STD’ is taken in a negative sense by the lenders.

Another section of your credit report is ‘Consumer Dispute Remarks’ section. It is a value addition provided to you or consumers. It lets you include special remarks by you for your accounts.

What matters more?

As mentioned before, a score more than 700 or 750 is considered good but it doesn’t imply that you will definitely get a loan on this basis. It is more likely that you will get a loan even if your score is less but your remarks are good. So, you should aim for keeping bad remarks off the credit report.

A credit score signifies your financial credibility in terms of repayment. It is an easy to understand and a straight forward approach in evaluating your financial records. A sore credit remark makes your credit score much more important. It matters more in such cases as it can be a negotiating factor in convincing the lenders to approve your loan. You can know more about loans and their repayment through this post as well. You should aim for rectifying your bad or non-desirable remarks. This would ultimately improve your credit rating without making you over concerned about it.

Setting your credit remark right: There’s surely a reason to feel bad about a disappointing credit remark. But you don’t need to worry much and the best way to handle this situation is obtaining a number of credit reports from various credit rating agencies. You just need to evaluate and find the positives that become your strong points while applying for a loan.

If you feel that the creditor has mistaken in providing a remark, you can ask him to remove or change the remark by providing all the evidence. He will do it specially in cases where you still owe them some balance. Another option is to contact credit rating agencies with supporting evidence to prove your point, invalidating the creditor’s comments.

If you feel that you have genuinely defaulted in your loan repayment and those are the valid remarks, you can lend a different angle to your application. You can always negotiate on some strong income sources like promotion that comes with a high salary or a well-performing new business. These points are indicative of how your repayment capability has improved from what it was when you earlier availed the loan.

Important tip: Get your credit report and evaluate it for some time before you apply for a loan. If your score is low or there are any derogatory remarks, ensure that you fix them before making a loan application.