A lender typically uses a loan or credit card applicant. credit score To assess the eligibility of the individual to avail these facilities. The lender also takes into account the credit score of the individual while deciding the interest rate for loan repayment. Hence, it is essential for the borrowers to maintain a good credit score. To do this, one can obtain his credit report at regular intervals.
In this excerpt, we look at why it is important to regularly check one’s credit report.
Credentials Check: “Checking one’s credit report from time to time gives a fair idea of one’s creditworthiness. This allows you to take the necessary steps to maintain and improve your credit score. Additionally, it can help prevent future rejection of loan or credit card applications due to poor credit scores,” said Radhika Binani, Chief Product Officer, Paisabazaar.com.
it is important to maintain a good credit score, which is typically 750 or more.
Identify clerical errors: Credit bureaus typically create credit reports based on data provided by your credit card issuer and lender. Any clerical error in collating such information on the part of the credit bureau or lender may result in incorrect data on your report. Such inaccurate data can lower your credit score, and negatively affect your future eligibility for a credit card or loan. Checking your credit report from time to time is the only way to spot such errors. In case any error or incorrect information is detected, you must report it to the concerned bureau or lender for rectification. A correct credit report will help you improve your credit score.
Detect identity theft: Generally, identity theft refers to the intentional misuse of a person’s personal information to conduct financial transactions. It often happens that fraudsters use erroneously obtained data to submit applications for loans or credit cards in someone else’s name.
Since your credit report records all credit-linked inquiries and transactions, periodic review of your report will help identify fraudulent credit inquiries or transactions, if any, in your name.
Avoids unnecessary difficult inquiries: Binani said, “Every time you submit a credit application, the concerned issuer or lender will obtain your credit report from the credit bureaus to assess your creditworthiness. Credit report inquiries are considered hard inquiries. Also, credit bureaus lower one’s credit score by a few points every time a hard inquiry is made. Several hard inquiries over a short period of time can significantly reduce your credit score. Getting your credit report doesn’t hurt your credit score.”
As such, you should check your credit report before availing any loan or credit card to know whether your credit score is high enough to get you a loan or credit card approved.
Control Credit Utilization Ratio: When you habitually check your credit report, you keep your credit utilization ratio under control. This ratio is the percentage of the total credit limit you have received during a month. According to experts, you should try to maintain this ratio within 30%. Going beyond this can leave you looking debt-hungry and less creditworthy to the lender.
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