Your creditors and credit card issuers are the ones who contribute the information that is included in your credit report. This information includes details about all of your credit accounts, both active and inactive, as well as recent account closures. Because the top credit rating agencies in India use the information that is included in your credit report as the basis for calculating your credit score, which is a three-digit numerical representation of your creditworthiness, it is extremely important to obtain a copy of your credit report and to review it on a regular basis.
The following is a list of the five most important reasons why you should obtain a copy of your credit report at regular intervals:
Assess your credit profile
Credit scores are one of the first parameters that lenders and top credit rating agencies in India assess when determining whether or not a consumer is creditworthy. Therefore, checking your credit score on a regular basis will provide you with a reasonable picture of your creditworthiness, allowing you to take the required steps to either maintain or increase it. Because of this, any future applications for credit cards or loans submitted by you won’t be turned down on the grounds that you don’t have a sufficient credit score.
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Identify clerical errors
Your credit report will be compiled by the credit bureau using the information that is provided by your lender and/or the company that issued your credit card. In the event that the creditor or the credit agency makes a typographical error in relation to this information, it is possible that incorrect information will be included in your credit report. These types of information can have a negative impact on your credit score and, as a result, your eligibility for future loans and credit cards.
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So, the only way to determine whether or not such information is incorrect is to obtain a copy of your credit report and examine it for inaccuracies of this kind.
Detect instances of identity theft
The term “identity theft” refers to the fraudulent use of the personal information of a third party in order to carry out financial transactions in the name of the person who is being impersonated. Identity thieves can apply for a credit card or loan in the name of another person by using information that they have fraudulently obtained. Due to the fact that your credit report contains a listing of all the credit-related transactions and queries, periodically retrieving your credit report might assist you in identifying any fraudulent credit transactions or enquiries that have been made in your name.
Avoid unnecessary hard enquiries.
When you apply for a loan or a credit card, the concerned lender or card issuer will request your credit report from the credit bureau in order to analyse your loan application. This happens every time you apply for a loan or a credit card. These kinds of credit record pull conducted by the lender are what are known as “hard inquiries.” Your credit score will drop by a few points for each of these hard inquiries that are performed. When you check your credit report from top credit rating agencies in India before applying for a loan, you will have a good indication of whether or not you are eligible for a loan based on your credit score. This information can be helpful in organising your loan applications in a manner that is appropriate and taking the required steps to maintain or increase your credit score.
What to know when fetching a credit report
At the moment, there are four top credit rating agencies in India, and each of these credit bureaus utilises a unique approach to credit scoring. As a consequence of this, every one of these bureaus will report a different credit score for the same individual. Therefore, you should request a copy of your credit report from each of the major credit bureaus at least once every year.
In addition, you can obtain a free copy of your credit report and updates to that report regularly by visiting online financial marketplaces. You will also be informed about the numerous credit cards and loans that are accessible to you based on your credit score by these marketplaces. You will also be informed of any changes that have been made to your credit score through their monthly updates, which can assist you in developing the necessary financial discipline that is required for enhancing or maintaining your credit score.
What to check when looking at a credit report?
Here are a few important things you should pay close attention to as you read your credit report:
Credit report enquiries
There are both hard and soft inquiries on a credit report mentioned by a credit bureau. If you see an unknown hard inquiry on your credit report, you should tell the credit bureau about it so that it can be fixed. Keep in mind that a hard enquiry from someone you don’t know can also be a sign of identity fraud.
Credit account details
Your credit report lists all of your credit cards and loans, both those that are still open and those that have been closed recently. Make sure that no account and its payment are left out of the report and that no unknown or extra accounts are added.
Credit repayment details
On a credit report, a borrower’s repayment history shows whether or not loans were paid back on time. Lenders look closely at this to figure out how people have paid in the past and how they will pay in the future. So, if any of this information is wrong, you need to get in touch with your lender and the bureau to make the necessary changes.
Personal details
Personal information like your name, PAN, cell phone number, and mailing address is in your credit report. Make sure all of this is said correctly.
Credit utilisation ratio
This is how much of your total credit limit you have used up. Most of the time, lenders prefer to lend money to people who have used up less than 30% of their available credit. This is because people who use up more than 30% of their available credit are seen as credit-hungry and, therefore, more likely to stop paying back their loans in the future.
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