Being financially fit is equally important as being physically fit and for that building your credit score is extremely crucial. Credit report is often called as an indicator of your financial health that contains all the components related to your credit history. So, to manage and maintain good credit score, it is essential to review your credit report regularly. Sometimes due to lack of awareness, consumers with good credit score also observe a decline in their credit score. Therefore, checking one’s credit report should be a regular practice for people who have their credit history generated.
What is a Credit Report?
A credit report is a summarized report of a consumer’s credit history generated by a credit bureau. Individual’s financial report is submitted by the lenders to the credit bureaus and after that credit bureaus manage and create credit reports based on the provided information. Credit report basically signifies loan or credit card applicants’ creditworthiness and repayment capabilities. Lenders find it to be an authentic source to consider before sanctioning loans to the applicants.
Credit report is prepared and delivered to consumers by four major credit bureaus operating worldwide. These credit bureaus include TransUnion CIBIL, Experian, Equifax and CRIF High Mark. The bureaus work on complex algorithm of the financial data provided to them by the banks and NBFCs. After scrutinization, they deliver credit score which provides information on an individual and organization’s financial history, payment records, active credit accounts, etc.
Credit report can always be checked before you want to:
- Open a new account or apply for a credit card.
- Apply for any type of loan.
- Search for a new job or change current job.
- Build or rebuild credit.
- Protect yourself against identity theft.
Reasons to review your credit report regularly:
It is free: Ideally credit reports should be reviewed every month. Nowadays, you can check your credit report from your smartphones, laptops, tabs, etc. anytime and from anywhere. At Paisabazaar.com you can check your credit report for free. All you need to do is to submit few details and get your credit report with regular updates emailed to you on your registered email address. Otherwise, if you want to get it directly from the respective credit bureau, you would be charged some amount of money for the same.
Helps in rebuilding good credit score: Reviewing your credit report regularly will help you in building a good credit score. More importantly, if you want to avail new loan or credit card, it is always better to periodically check your credit report to keep a track of prior credit related problems or issues and getting them resolved at the earliest by raising a dispute with the respective credit bureau.
Managing personal finances: As you review your credit card bills, loan statements or bank statements to manage personal finances, just like that you can review your credit report as well. Like other statements, credit report is also considered an important personal financial document. To be financially successful, it is essential to manage credit, likewise you keep a track of your spending and savings.
Prevents you from being a victim of Identity theft: In the current scenario, identity theft is becoming more prevalent and pervasive in the financial market. Consumers who are less aware and more ignorant about their finances are more prone to be targeted as victims of identity theft. To prevent yourself from being the victim, you need to review your credit report regularly to check whether no additional or unknown debt is getting accumulated in your account(s). You also need to keep a check on any unauthorized transactions and unknown accounts added to your name, if any.
Correcting inaccuracies: Wherever you plan to apply for a fresh credit line, it is better to check your credit report beforehand, so that you can spot the inaccuracies. The incorrect data can be corrected by raising a dispute with the credit bureau. Thus, by getting the inaccuracies resolved, it will be easier for you to avail fresh credit which will be error free. Moreover, it will help in the rise of your credit score and there will be less chances of loan application rejection because of error free report. Sometimes, lenders forget to send accurate information to the credit bureaus which in turn results in your reduced credit score.
Precaution while Co-Signing a loan: If in case you have co-signed a loan and are unaware of the status of the borrower’s repayment trend, then it might sell problem for you. There could be a possibility where the borrower has delayed or missed the loan EMIs (Equated Monthly Instalments). In this scenario, where the payments are missed or delayed the first thing that will be impacted is your credit score. Therefore, if you are not reviewing your credit score regularly you will not be able to keep a track of the loan’s status that you have co-signed and this practice will keep on further deteriorating your credit score.
Key Components of your Credit Report:
Personal information: This section consists of your personal information like full name, date of birth, PAN card number, Voter’s ID, gender, passport number, driver’s license number, etc.
Contact information: It will display your contact details, such as email addresses, telephone and mobile numbers, and permanent, current, and office addresses.
Employment information: It contains your income and occupation details, as reported by your lender to the credit bureau.
Account information: This is the most important section of your credit information report, as this section holds the details of the loan(s) and credit cards you have taken in past or currently availing, if any. It will have specific loan related information, including loan date, last payment, and loan outstanding, total loan amount. It will also have a month wise summary of payments made by you for the past 36 months.
Enquiry information: It depicts the enquiry made by the lender to check and process some of the important features of your credit application, such as name, date of application and its size.
Credit reports contain your essential financial information; therefore it is equally important for you to check your credit report thoroughly and regularly. By checking credit report, you can ensure that your account related information and payment history is accurate. Hence, by now you must have had a better understanding about your credit report and the importance of reviewing it regularly. Follow this practice and enjoy the rise in your credit score to have a financially secured future.