Published on Mar 10, 2023Updated on Oct 10, 2023
Your credit report contains a detailed history of your credit history and financial behaviour. It includes vital information about your credit accounts, payment history, and any outstanding debts. Understanding your credit report is critical for budgeting and maintaining a decent credit score. These reports, however, are frequently loaded with complicated financial jargon and credit report lingo that can be difficult to comprehend. In this post, we will define ten critical credit report terminology that every individual should understand in order to effectively manage their credit and financial health.
The principal balance is the unpaid amount of a loan or credit account, excluding interest and other fees. The amount of each payment that goes toward principal, interest, or other fees will be specified in your agreement. To be paid in full, the principal balance of a loan must be zero.
Your credit report's account status relates to the current status of your credit accounts. It tells you if your credit accounts are open and active, closed, in default, charged off, or in collections. The account status assists lenders and other credit providers in determining whether to approve your personal loan or credit application.
This is the card issuer's overall spending limit or credit line. Factors such as your salary, good CIBIL score, repayment history, and length of time with the lender all influence your credit limit. If you have a strong payback history, financial institutions may occasionally offer you higher limits.
In finance, the APR is the annualised interest charged if you do not pay the outstanding dues of a billing cycle in full by the due date. Unpaid dues incur a monthly interest charge. To calculate the monthly interest rate, divide the APR by 12.
Must Read: How is Your CIBIL Score Calculated?
Inquiries on your credit report relate to requests for access to your credit history made by lenders and other credit agencies. When you apply for an online personal loan, credit card, or any other type of credit, the lender will conduct a credit inquiry in order to obtain a copy of your credit report and evaluate your creditworthiness.
A charge-off on a credit report is a debt that the lender has written off as a loss. This signifies that the lender has judged that the debt is unlikely to be collected and has deducted it from their records as an asset. A charge-off can significantly lower a person's credit score and can remain on their credit report for up to 7 years.
On a credit report, this credit report terminology refers to an unpaid debt that has been turned over to a collection agency for recovery. Collection accounts can stay on a person's credit report for up to seven years, lowering their credit score.
A promotional block on a credit report is a temporary freeze or hold placed on an individual's credit account by a lender or creditor to prevent new charges or transactions from being made. This block may be implemented during a promotional period or for security reasons, and it is normally removed after a defined amount of time or when the issue has been handled. Promotional blocks usually have no effect on a person's CIBIL score for personal loans.
"Resolving an account" signifies that the account's outstanding amount or issue has been settled or fixed. This could be due to a number of factors, including paying off the sum in full, reaching a payment agreement, or disputing an account error. When an account is settled, the credit report is normally updated to reflect the resolution.
In the context of a credit report, a "instalment account" refers to a sort of loan or credit arrangement in which the borrower repays the loan in regularly scheduled payments known as installments over a defined period of time until the debt is fully paid off. Car loans, personal loans, and student loans are all examples of installment accounts.
By paying close attention to such credit report terminology, you will be able to increase your credit score and make wise financial decisions. Checking your credit report on a regular basis is an excellent habit to develop, and by knowing the key terms, you will be able to better understand the information contained in your report.
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