Effects of PAN Card on Credit Score in India

A Permanent Account Number (PAN) is important documentation issued by the Income Tax Department of India. It is an integral tool of identification for all financial transactions, including ITR, business loans and other forms of credit. Linking your PAN card with your CIBIL can help you avoid inaccuracies in your credit report and get desirable funding opportunities. In this article, we will explore the effects of a PAN card on your credit score, how you can check your credit score using your PAN and other key advantages.

What is PAN?

PAN is a 10-digit alphanumeric unique identity provided to an individual or entity in India. You need your PAN for tax-related transactions like opening bank accounts, financial investments, business loans, filing income tax returns (ITRs) and real estate purchases.

PAN tracks every financial transaction associated with a person or an organisation, serving as an essential means for controlling and keeping an eye on revenue, expenses and taxes.

PAN and Credit Report Linkage

When you apply for a loan or credit card, lenders request your PAN details, which they report to credit bureaus like CIBIL, Experian, Equifax and CRIF High Mark. These bureaus use your PAN to collate credit history data (such as business loans, personal loans, credit cards, etc.) and repayment patterns, to generate your comprehensive credit report and score.

Indirect Effects of PAN on Your Credit Score

Although PAN does not directly influence your credit score, it can have some indirect effects:

1. Centralised Credit History: Credit bureaus use PAN card as their primary means of tracking your credit profile, which includes business loans, balances owed and payment history. A good credit behaviour with PAN-CIBIL connect improves your credit score.
2. Multiple Applications: Applying for multiple credit cards or lines of credit in a short period of time can negatively impact your credit score. Multiple inquiries associated with your PAN indicate insolvency. To prevent this, space out your applications.
3. Single Identity Across Transactions: Your entire credit profile, including the number of credit accounts, outstanding debt and payment history, links to your PAN. The more positive your credit behavior, the better your credit score becomes.
4. Transparent Credit History: CIBIL-PAN linkage puts together all credit history in one place, enabling lenders to get a complete picture of your creditworthiness when you apply for a loan. A strong credit profile can enhance your business loan eligibility.
5. Fraud Prevention and Identification: PAN connects your identity to financial transactions, which aids in the detection of fraud. Preserving your PAN shields it from abuse and keeps identity theft from lowering your credit score.

How to Check Credit Score Using PAN Card?

• Step 1: Visit the official CIBIL website or any of CIBIL’s licensed partners-banks, financial institutions or credit card companies.
• Step 2: Navigate to the “Get your CIBIL Score” or “Free CIBIL Score” section.
• Step 3: Enter your personal details, including name, date of birth, email address and mobile number.
• Step 4: Provide your 10-digit PAN card number and validate it through the OTP sent to your registered mobile number.
• Step 5: Answer additional identity verification questions, if asked.
• Step 6: Access your credit score and CIBIL report for free or by paying a nominal fee, depending on the provider.

Key Facts about Free CIBIL Check

• You can check credit score for free once a year from the official CIBIL website.
• Banks and credit card companies often offer free monthly CIBIL score checks to their customers.
• Checking your own CIBIL score doesn’t negatively impact your credit, since it qualifies as a soft inquiry.

PAN Card and Business Loan Eligibility

1. Loan Requests Need PAN: When you apply for a loan or other credit product, lenders request information from your PAN card. They use it to obtain your credit score and report from credit reporting agencies. Having a high score and accurate PAN information accelerates your loan approvals.
2. Interest Rates: Your business PAN provides a comprehensive credit behaviour. A good credit history boosts your negotiating power, enabling you to secure reduced interest rate for business loans from creditors. A lowered credit score showcases a high-risk profile and lenders may charge a higher interest rate to cover projected losses.
3. Offers for Pre-Approved Loans: Many financial organisations provide pre-approved loan offers based on your PAN and credit score. With PAN-credit linkage and maintaining healthy credit behaviour, you can easily enhance your eligibility for business loans on favourable terms.

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Conclusion

Your PAN card and credit score can be interlinked in multiple ways. From tracking your credit history to influencing loan approval, the PAN card plays a significant role in shaping your financial future. Maintaining an accurate PAN card and monitoring your credit score is vital to ensuring seamless access to financial products. Always ensure that your PAN card details are up-to-date and regularly check your credit score to make informed financial decisions.