Thirteen ways to improve your credit history

Credit history: what kind of "beast" is it?

A credit history is a kind of "dossier" on a borrower that stores essential information. It is right there that you will see which microfinance organizations, banks, and other financial institutions you have applied to, how much money you borrowed, and for what term. The CH contains information on whether you repaid debts on time or had overdues, and whether you were a co-borrower or guarantor for someone else's loans.

A borrower's credit "dossier" consists of four sections and looks like this:

• Title section.

It contains passport data, SNILS, and INN numbers.

• Main section.

You will find all the most interesting things in this exact section. It contains information on closed and active loans. Details on all overdues and court-ordered debt collection are posted here.

There is an opinion that if a person has debts on alimony, utility bills, or mobile communications, this information is also entered into the main section of the CH. In fact, such organizations do not cooperate with credit history bureaus and do not report to them.

This section also contains the credit rating. If yours is high, it means you have every chance of getting a loan. Few people dare to approve an application for a borrower with a low rating.

• Closed section.

This section contains information on who issued the loans and to whom your debt was assigned (if applicable). The closed section records information on those who have checked your CH.

Please note! Information about your rating may be of interest to banks, credit consumer cooperatives, insurance companies, car-sharing services, and potential employers.

•  Information section.

Which banks and financial institutions you applied to and why you were refused is the information posted in this section.

2 + 4 ways to check your credit history

Currently, there are 11 credit history bureaus in the Russian Federation. To find out exactly where your "dossier" is stored, send a request to the Central Catalog of Credit Histories of the banks of the Russian Federation. This can be done in two ways:

• Gosuslugi portal

Find the "Taxes and Finance" section, then go to the "Credit history bureau information" subsection. To get the information, enter the requested data. A list of all credit history bureaus where your credit histories are stored will be sent to your personal account.

•  Bank of Russia website

To get the necessary information on this website, you will need the credit history subject code. This secret digital combination is indicated in the agreement (if you took out a loan). Codes are also issued by the credit institution of which you are a client.

Note! If you forgot your code, get it again. Contact a bank employee and express your wish.

Once it is known which bureau stores your credit history, you can access it for free or for a fee.

To check your credit history for free, use one of the following methods:

• Online.

Create an application and submit it via the credit history bureau website. Within three business days, you will receive a response to the specified email address.

•  By telegram.

Although few people use this method, it is viable. Send a request with the required information. The response arrives within three days.

•  By regular mail.

If you are in no rush, you can check your credit history by sending a regular letter to a credit history bureau (CHB). To receive a response, the request must be notarized. Even though you are sending the request by mail, specify how you would like to receive the reply: in paper or electronic format.

• At the CHB office.

By visiting a CHB office with your passport, you will get an answer to your question regarding your credit history on the same day.

CHBs provide information about credit history free of charge no more than twice a year.

You can check your credit history an unlimited number of times for a certain fee. You can also contact a CHB office, send a letter, telegram, or online request. The financial institution where you are serviced also provides the necessary information.

Note! The main part of your credit history is available to banks, credit institutions, insurance companies, etc. Only you can view the full report.

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What can ruin your credit history

If banks do not grant loans and MFIs do not issue microloans, it means your credit history is terrible. What can ruin it? Let's figure it out.

• Overdues.

The easiest way to ruin your reputation is to take out a microloan or bank loan and not repay it. Some borrowers think that one or two overdue payments are no big deal. This is a misconception. Even after a slight delay, the lender develops a negative opinion of the client. They may think the borrower has a low income level, is irresponsible, or is forgetful.

Note! Sometimes overdue payments occur through the fault of the organization through which the client transfers funds. In this case, you need to act immediately and file complaints against the bank, post office, or other organization. If you can prove your innocence, your relationship with the lender will not be spoiled.

• Outdated data.

Data on a loan you received 6 to 7 years ago is no longer of interest to the lender. Fresh information will be required to assess your solvency. Therefore, to avoid rejections, regularly use the services of lenders. You do not have to apply for large amounts; 5,000 RUB is enough.

• Lender errors.

Unfortunately, not all lenders comply with the law. Many companies forget to send information about a repaid loan to the CHB. As a result, no debts exist, but they still "hang" on the borrower.

• Frequent inquiries.

All inquiries you send to a bank or MFI are registered with the CHB. If a person submits 20 or 30 applications a week, this alerts potential lenders. Frequent inquiries lead to obvious conclusions: the client is in a difficult financial situation and is diligently searching for companies willing to approve a loan.

• False rejections.

There are cases when a client changes their mind and cancels a request, but the CHB counts it as a rejection.

• A large number of loans.

All banks calculate debt-to-income ratios. If the DTI exceeds 0.5, you may be denied your next loan even with a good credit history.

• Suretyship.

If you vouch for someone and they fail to repay their debts on time, the "stain" falls not only on the borrower but on you as well.

• Ongoing legal proceedings.

Very rarely do banks or microfinance companies approve applications for clients who have had funds recovered through the courts. It is easier to turn down scandalous and problematic borrowers than to deal with them in court later.

Credit history is also affected by early loan repayments, fraud, bankruptcy, and other debts.

13 ways to improve your credit history

If your financial reputation is ruined and you face rejection after rejection, here are a few tips to help improve your financial standing.

 1 — Cash loan

If your credit history is not severely damaged, try taking out a small cash loan for a minimum term. By fulfilling your obligations, you can build a history of "positive" and timely payments.

2 — Online loan

Applying to an MFI is a reliable way to quickly improve your financial reputation. An online loan is a small amount that companies usually disburse for 30 days. To fix your history, take out small amounts (around 5,000 RUB) and repay them on time.

Microfinancing has both pros and cons. On the positive side, MFIs have few rejections. They frequently approve applications from clients with a damaged reputation.

The negative side is overpayments. Borrowers with a damaged reputation are rarely issued loans at minimum interest rates. If the loan is not covered on time, heavy penalties apply.

3 — Credit card

Many banks not only issue credit cards without checking credit history, but sometimes even prompt you to get one. Typically, such payment instruments have a grace period of up to 50 – 60 days (or more).

A credit card works on this principle: you purchase goods and pay with the plastic card. Before the grace period ends, you top up the account.

Grace period UP TO 50 – 60 days. Depending on when you made your first purchase, it can be much shorter. Therefore, to take advantage of the maximum grace period, make purchases in the first days of the month.

Here is an example: I have a credit card with a grace period of up to 55 days. If I make my first purchases on October 1, I need to cover the balance by the 25th of the following month. That means I have the full 55 days. If I buy goods on October 5, the grace period will be only 50 days. By using the credit card for the first time on October 20, my grace period is reduced by another 15 days.

4 — Secured loan

No one is granting loans and microloans, but you want to improve your financial reputation? Then offer the financial institution some collateral. For example: real estate, a vehicle, or other valuables. Since bank risks are minimal in this case, in 90% of cases they approve applications from such borrowers.

5 — Installment Card

Improve your reputation with an installment card. This is a banking product that allows you to buy goods on credit with deferred payments. The terms for an installment card are roughly the same as for a credit card. You are allowed to spend funds within the limit set by the bank.

Note! Most often, you can buy goods in installments at the bank's partner stores.

6 — Refinancing

Refinancing means taking out a new loan on more favorable terms to cover old debts. Bank loans, microloans from MFIs, and credit cards can be refinanced. In this case, the client enters into an agreement with the bank, and the financial institution independently covers all debts (with refinancing, the borrower does not receive the cash in hand).

It is best to apply for refinancing when you have one or two overdue payments. If your credit history is already damaged, the chances of concluding such an agreement decrease.

When you arrange for refinancing, your reputation improves. You have fully settled your old debts and taken out a new loan.

7 — Restructuring

For clients who are unable to service their obligations, banks offer loan restructuring. This is a procedure that allows changes to be made to the agreement.

Banks offer the following terms:

•  changing the terms and sizes of payments;
• writing off a portion of the debts;
•  granting a grace period;
• refinancing (funds for refinancing can be obtained from the same bank where the debt is held).

Depending on the situation, measures can be applied comprehensively or separately.

8 — Guarantorship

It cannot be said that if you bring a guarantor, your credit history will immediately improve. No, but with the appearance of a guarantor, the chances of taking out a new loan increase manifold. A credit repaid on time is a "plus" to your rating.

9 — Removal of Inaccurate Data

If the bank submitted false data to the credit history bureau that affects your credit history, removing it will restore your reputation.

For example: you have paid off your debt obligations, you have the necessary receipts on hand, but the credit history bureau shows overdue payments and debt. In this case, you need to write a corresponding application, attach copies of supporting certificates, and send it by regular or electronic mail to the credit history bureau. The bureau's staff will review the application and delete the inaccurate data from your history.

Banking history knows of several cases where information in a credit history was contested through judicial authorities.

10 — Buying Goods in Installments

A smartphone bought in installments can help fix a bad credit history. When making the purchase, an agreement is concluded with the store's partner bank. In essence, the bank gives a loan to the store. Information about the concluded transaction is sent to the credit history bureau. If the buyer does not allow overdue payments and makes payments on time, their reputation increases.

Please note! If the goal of buying a phone in installments is to improve your reputation, do not arrange the agreement directly with the store. Stores do not transfer data to credit history bureaus.

11 — Contacting a Pawnshop

The Kommersant newspaper has an interesting article about how pawnshops report borrowers. It states that the largest credit history bureau, NBKI, is recording a significant increase in pawnshops wishing to cooperate with it. Although these institutions are not obliged to transfer data about clients to credit history bureaus, they can do so.

Situation: you pawned valuables and did not redeem them. The pawnshop sells the item and sends information about the payment delay to the credit history bureau. There is your "minus" in the credit history.

If you know a pawnshop that cooperates with credit history bureaus, pawn rings, earrings, or other items and redeem them a couple of days later. This is a great opportunity to improve your financial reputation.

12 — Annulment of Credit History

Of course, the annulment of credit history helps make your reputation crystal clear. But it is cleared once every 10 years, provided that there has been no activity on it. This method is unlikely to work in practice because you cannot know when the last action was recorded.

There is such an opinion: to annul your history, it is enough to change your last name. This is just a myth that is not worth your attention. When forming a credit history, your SNILS is specified, and it remains unchanged even when you change your last name. If the credit history bureau discovers that a person changed their last name without a serious reason, the situation will only worsen.

13 — Bankruptcy

Having declared yourself bankrupt, you can take out your next loan after the annulment of your credit history.

Use the tips given in this article. This will help improve your financial reputation, and banks (or MFIs) will no longer have reasons to refuse you.

If you frequently take out loans, remember:

• People with bad credit histories may experience problems when trying to land a good job.
• Credit history is stored in the credit history bureau for 10 years.
• Credit history is spoiled by the borrower's irresponsibility or the lender's mistakes. No one rules out force majeure situations. In such cases, you need to negotiate with the lender. Ask them for a lower interest rate, credit holidays, refinancing, or restructuring.
• All data about you as a borrower is stored in the credit history bureau.
• If you are offered credit history improvement for a fee, never agree. These are fraudsters.