A lender generally uses the credit score of a loan or credit card applicant to assess the person’s eligibility for these facilities. The lender also takes into account the credit score of the person while setting the interest rate for the loan repayment. Hence, it is essential that borrowers maintain good credit scores. To do this, one can go and get his credit report at regular intervals.
In this article, we take a look at why it’s essential to regularly check your credit report.
Credit check: âPeriodically checking your credit report gives you a fair idea of ââyour creditworthiness. It allows you to take essential steps to maintain and improve your credit score. Additionally, it can help to avoid rejection of a loan or credit card application in the future due to a bad credit rating, âsaid Radhika Binani, Product Manager, Paisabazaar.com.
It is important to maintain a good credit rating, which is usually 750 or higher.
Identify clerical errors: Credit bureaus typically create credit reports based on data provided by your credit card issuer and lender. Any clerical error on the part of the credit bureau or lender in collecting this information may result in incorrect data in your report. Such inaccurate data can lower your credit score and can negatively impact your future eligibility for a credit card or loan. The only periodic check of your credit report is the way to detect such errors. If an error or erroneous information is detected, you must report it to the office or lender concerned for correction. A corrected credit report will help you improve your credit score.
Detect identity theft: Generally, identity theft refers to the deliberate misuse of an individual’s personal information to conduct financial transactions. Often, fraudsters will use wrongly obtained data to submit a loan or credit card application on behalf of someone else.
As your credit report records all credit-related inquiries and transactions, a periodic review of your report would help identify any credit inquiries or fraudulent transactions, if any, on your behalf.
Avoid unnecessary inquiries: Binani said, âWhenever you submit a credit application, the relevant issuer or lender retrieves your credit report from the credit bureau to assess your creditworthiness. Such credit report inquiries initiated by the lender upon receipt of a loan or credit card application are considered difficult inquiries. In addition, the credit bureaus reduce an individual’s credit score by a few points each time a serious question is asked. Multiple inquiries over a short period of time can result in a significant reduction in your credit score. Recovering your credit report does not disrupt your credit score. “
This way, you should check your credit report before taking out a loan or credit card to get a reasonable idea of ââwhether your credit score is sufficient to get you approved for a loan or credit card.
Control the rate of use of credit: When you usually check your credit report, you tend to be in control of your credit utilization rate. This ratio is the percentage of the total credit limit that you have for a month. According to experts, you should try to keep this ratio below 30%. Going above and beyond can make you appear greedy for credit and less creditworthy to a lender.
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