Five reasons why you should check your credit report regularly
New Delhi: Banks and other financial institutions assess the creditworthiness of loan and credit card applicants based on information from their credit reports. Lenders use this information to set the loan interest rate, loan amount, etc. The best way to understand your credit eligibility and position is to check your credit report and credit score frequently. Frequent review of your credit report would help you identify inaccurate information, which could lower your credit score.
Indication of your solvency
The credit bureaus calculate the credit score based on the information provided by the lenders. In addition to being one of the main parameters for loan eligibility, credit scores are widely taken into account when establishing risk-based pricing and also when selecting recruitment in certain industries. Therefore, it is imperative to check your credit report at regular intervals, in order to get a fair idea of ââyour creditworthiness, especially before submitting any credit application. Examining your credit report not only helps control your credit score, but also gives you enough time to take corrective action and rectify errors, if necessary.
Helps in the early detection of 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. # Error in credit repayment details
Your credit repayment history helps lenders predict your repayment behavior. When checking your credit report, make sure that the refund information is correctly listed and updated.
Identify difficult unknown inquiries
Every time you submit a credit application, the lender pulls your credit report from the credit bureaus to assess your creditworthiness. Such inquiries initiated by the lender are treated as serious inquiries, which may lower your credit score by a few points. If you spot an unknown claim on your credit report, immediately contact your office and have it corrected.
Submitting multiple loan and credit card applications, especially in a short period of time, can hurt your credit score. Therefore, instead of submitting applications directly to multiple lenders, consider applying through online financial markets. While these platforms also retrieve your credit report from the agencies, these requests qualify as indirect inquiries, which do not harm your credit score.
Check your credit utilization rate (CUR)
The credit utilization rate is the proportion of the credit limit you use over the total available credit limit. As lenders generally prefer to lend to credit card users by keeping the CUR below 30%, failing to meet this mark can not only lower your credit score, but also portray you as a credit-hungry consumer. Therefore, you should avoid exceeding the CUR limit. If you tend to frequently exceed this 30% mark, consider either opting for an additional credit card or asking your lender to improve your credit limit. This would increase your total credit limit and thereby reduce your CUR, provided you do not increase your spending.
Helps you predict the outcome of your loan application
When you apply for a credit card or loan without checking your credit score, you run the risk of being rejected because of a bad credit score. This can hurt your credit score and further reduce your chances of getting a loan in the future.
Checking your credit score before you apply can give you a good idea of ââwhether or not you should apply for a loan. If your credit score is over 750, your chances of getting a loan are high. If your credit score is below 700, you should consider improving it before applying for a loan.