If you have never looked at a credit report before, here is what you need to know. Your credit report is a file containing a variety of personal data about your financial life and your credit. It can include income information, address history and your credit history. Inside your credit report, you will find information such as how many credit cards you own and how much available credit you have, any mortgages or car loans, any lines of credit, and your payment history. There can be positive items on your credit report, such as a history of on time payments, and there can be negative items, such as defaults on loans, excessive amounts of debt, late payments or bankruptcy filings. Whenever you apply for credit, or even for such items as homeowners insurance or rental agreements, the lender or agent may pull your credit report to determine your level of risk. One of the reasons that it is so important to maintain good credit is that a better credit report can mean more favorable loan terms, lower premiums and more financial flexibility.
Credit bureaus or consumer reporting agencies collect and store about you that is submitted to them by credit card companies, lenders, banks, NBFCs or other financial institutions. This information helps your lender to take a decision on granting you loan and also, on the rate of interest they should charge from you
Your credit report is divided mainly into three sections :
Personal information : Your name, address, employers.
Accounts Payment history, current outstanding and repayment track record of credit cards, mortgage loans and all other credit accounts.
Enquiries Companies that have accessed your credit report
Benefits of checking credit report
We have enlisted a few benefits of checking your credit report :
- Know your credit standing : With the advent of fintech companies like MyLoanCare.in, accessing your credit score is just a click away. You can check your credit report as and when you want. Whether it’s good or bad, it’s better to know your credit score and know where you stand in terms of your credit track record as seen by banks. If your score is low, you can take steps to improve it. On the other hand, if your credit score is good, you can focus on maintaining it and getting a good loan bargain, when required
- Make sure your credit report is accurate : Checking your credit score can help you check if information reported in your credit report is accurate. In case there is any error, get in touch the credit bureaus, lender bank or credit card company to get it rectified immediately.
- Keep the hard enquiries at bay : Every time you apply for credit, the lender sends a request to the credit bureau to check your score. This is termed as ‘hard enquiry’. Frequent hard enquiries and enquiries that keep getting rejected gives an impression that you are credit hungry and have been struggling to get the loan you require. On the other hand, when you check your score for your own understanding, it is just considered as a ‘soft inquiry’ and has no impact on your credit score.
- Get better interest rates : Banks offer better interest rates to loan borrowers with a good credit score of 750 and above. Knowing your score before applying for credit gives you the ability to negotiate for better interest rates with your lender.
- Avail pre-approved offers : Fintech companies not only allow you to check your credit scores for free but have pre-approved offers for various loans for different ranges of credit scores because of their tie-ups with various lenders. You can also compare the offers available from different banks and pick the best one.
How to improve credit score?
If you have a low or poor credit score, you can follow the below given tips to improve it :
- Get your credit reports corrected : If you believe that your credit score is low due to a wrong reporting by your bank or the credit bureau, get it corrected by contacting them. Keep a tab on your credit score at regular intervals to ensure that the corrections are getting reflected in your report. Inaccuracies may be due to wrongly reported payment conditions, misstated personal information etc.
- Make payments on time : Paying your dues on time is an important part of your credit score. A late payment will lower your credit score and can adversely impact it for several years. .
- Keep your balances low : It’s advisable to use a credit card only for emergency expenses and pay off the balance as soon as possible. In addition, keep your debt below 35% of the total available credit balance. If your debt surpasses this limit, it reflects negatively on your credit report. .
- Get the right mix of credit accounts : You must have the right mix of credit accounts. If you have only one type of credit account, your score may be lower. For example : Secured loans like home loans or car loans improve credit score as they build long-term appreciating assets, while having a higher proportion of unsecured loans such as personal loans, credit card debt, etc. can have a negative impact on your credit score. .
- Avoid applying for new credit too often : Applying for a new credit account frequently can have a negative impact on your credit score. This includes applying for loans, credit cards and other forms of credit. When lenders see numerous applications within a short period, they consider you credit-hungry and your application might get rejected. .
