We are often told about the importance of credit scores. But what about credit report? Isn’t it essential to check it before submitting a loan or credit card application? Certainly yes!
Let’s deep dive and understand the importance of checking credit report.
Provides you with information regarding your creditworthiness: Credit bureaus determine your credit score by analysing the data regarding your loan and credit card repayments that are submitted to them by financial institutions such as banks and companies that issue credit cards. Your credit score is determined based on the information that is included in your credit report. Because of this, it is vital that you check your cibil report on a regular basis, especially before applying for any kind of credit, whether it be a loan or a credit card. If you check your credit report before applying for credit, you will be able to determine your current credit score, and then, if necessary, you can take the necessary steps to improve it. This is because lenders determine your creditworthiness based on your credit score, and they typically reject credit applications from applicants with low credit scores.
Assists in the process of identifying any inaccuracies in your credit report: Your credit score, as well as your future eligibility for loans and chances of approval, might be negatively impacted by even the smallest mistake on the side of the lender or the credit bureau. It is, therefore, a wise decision to check your personal as well as company credit report and, if there are any inaccuracies, identify them and get them fixed as soon as possible. The following is a list of some of the potential inaccuracies that could be found in your cibil report:
— An error occurred with the details of the credit account
Any incorrect reporting or a possible error related to the updating of accurate information regarding your credit accounts can have a negative impact on your credit score. This is because your credit report lists all of your active and recently closed credit accounts and is based on the information provided by lenders. As a result, you need to examine the data of your credit card accounts and loan accounts to ensure that they have been appropriately reported and updated in your credit report. Be sure to get in touch with the relevant credit bureau as soon as possible if your cibil report contains any accounts or transactions that are missing or that you are unable to identify.
-Error relating to credit repayment details
Your company credit report, similar to your personal credit report, will include specific information regarding the repayment history of your loans and credit cards, including an indication of whether or not the payments were completed on time. Lenders will review your past behaviour regarding the repayment of credit in order to determine the likelihood that you would default on future loans; as a result, they will decide whether or not to accept your credit card or loan application. As a result, it is essential to perform a thorough check of the specifics of your repayment history, including any instances of missed, late, or partial payments that may be included in your credit report. It is important to keep in mind that your credit score can go down if your credit report contains any erroneous information.
-An error has been made involving sensitive personal information
For businesses, your company credit report also includes personal information about you, such as your name, contact number, PAN data, communication address, and other similar characteristics. The fact that creditors check your credit report before deciding whether or not to approve your application for credit means that if there is any kind of discrepancy between the personal information contained in your cibil report and that which is mentioned in your application for credit, your application may be rejected. In the event that these appear to be clerical errors on the part of the credit bureau, you need to make urgent contact with them in order to get the dispute handled as quickly as possible.
Finds hard enquiries that were made on your credit report but were unknown to you
Lenders will obtain a copy of your credit report from the relevant credit bureaus whenever they receive an application for a loan or credit card from you. This allows them to determine whether or not you are creditworthy. These kinds of lender-initiated credit report enquiries are known as “hard enquiries,” and each one of these enquiries is noted in your credit report and lowers your credit score by a few points. Therefore, checking your credit report, including both personal and company credit report, prior to making an application for credit will give you the ability to know to identify the presence of any unknown or unnecessary hard enquiry in your credit report. This is important because the presence of such an enquiry in your credit report may be an indication of possible fraud due to identity theft or a clerical error. As soon as you become aware of such an inquiry, you should get in touch with your credit bureau as soon as possible to have it fixed or resolved.
Assists in determining whether or not your credit utilisation ratio is within 30%:
A person’s credit usage ratio, also known as their CUR, is the ratio of the amount of credit that has been used to the entire credit limit that is available to the person. A breach of this mark not only lowers your credit score that is reflected in cibil report but also creates an impression of credit hungriness, thereby increasing the risk of a possible default in the future. This is because financial institutions generally prefer lending to those who maintain their CUR within 30 percent of the total credit limit.
Checks to see if you have a healthy mix of credit:
The combination of secured and unsecured credit that you have available to you is referred to as your “credit mix.” Lenders typically give preference to borrowers who have a higher proportion of secured loans, such as home loans, loans secured against property, and car loans, over borrowers who have a higher proportion of unsecured loans, such as personal loans, education loans, or loans secured against credit cards.