Once you obtain any loan or credit card from a bank or financial institution, repayments or defaults directly start impacting your credit score. However, it is not the only reason as to how your credit score can be impacted. Nonetheless, it is important to keep an eye on your credit report to ensure it is accurate and displays your true credit history. Let’s understand what exactly a credit report is and why you should be checking your credit report regularly with Koshex!
What is a Credit Report?
The credit report is a detailed document of your credit history that displays detailed information relating to how many loans and financing facilities you have obtained, the number of EMIs you have paid, EMIs you have skipped, the status of each of your loans, any defaults, etc. This detailed credit history creates a credit score, also popularly called as CIBIL score. This is an indicator of your creditworthiness and is used by banks and financial institutions to determine your lending eligibility.
Also Read: Using Credit Cards Responsibly What to Know
7 Reasons to Check Credit Report Regularly
Here’s why monitoring your credit report regularly is important:
1) Identity Theft Detection
One of the major reasons to check credit reports is to stay protected from fraud. Today, loans and credit cards can be issued quickly. Regular monitoring of your credit report helps you detect any unauthorized or fraudulent activity taking place in your name. This helps you identify identity theft quickly and take corrective action promptly.
2) Accuracy of Information
Periodically checking your credit report ensures that all the information relating to your credit transactions, including account details and payment history, is accurate. Any errors in your credit report can directly impact your credit score.
3) Credit Score Monitoring
Your credit report directly influences your credit score. If you check your credit report regularly, you can track changes in your score, understand the reasons for the same, and take corrective action if needed.
4) Early Detection of Issues
There can be errors in reporting by banks or financial institutions. This can include missed payments or wrongful reporting of balances due. Identifying such discrepancies early allows you to address these issues and get them corrected by your bank or financial institution before they escalate and negatively impact your credit.
5) Ready for Loan Application
If you are willing to apply for a new loan, it is better to check your credit report before applying. This enables you to assess your creditworthiness and helps you ensure that your credit report reflects positively when you apply for loans or credit cards. Once you know your status, it also assists in selecting the right lender. This will save you from applying with multiple lenders, making multiple credit inquiries, and denting your credit score. It also reduces the surprises that may come at the time of loan processing or approval, and you can keep your answers ready for any discrepancy.
Also Read: How to Get a Personal Loan for a Low CIBIL Score?
6) Interest Rate Negotiation
One of the reasons to check a credit report is that a good credit report gives you negotiating power when negotiating interest rates with lenders. If you know your credit report and credit score, it will help you negotiate the interest rate with your lender and get the loan on some of the most favorable terms.
7) Credit Utilization Management
The credit utilization ratio is an important factor that most lenders and financial institutions consider. It depicts whether you are highly dependent on loans and credit facilities to sustain your lifestyle. Monitoring your credit report allows you to assess your credit utilization ratio, which acts as a key factor in determining your creditworthiness.
Factors That Affect Your Credit Report
The importance of checking your credit report regularly cannot be undermined. Therefore, it is important to know the factors that can affect your credit report. These factors include:
- Timely Repayments: Timely repayment of your loans is one of the most important factors that affect your credit score. Timely repayments increase your credit score steadily while missing out on loan EMIs can harm your credit score.
- Credit Utilization Ratio: This is highly important when you hold a credit card. How much credit limit you utilize out of your total credit limit determines your credit utilization ratio. It shows how dependent you are on the credit facilities to sustain yourself. A high credit utilization ratio can have an adverse impact on your credit score.
- Hard Inquiries: When a lender requests to review your credit report, it gets recorded in your credit report as a hard inquiry. Multiple hard inquiries depict that you are constantly trying to avail of a loan facility but are getting rejected. This can also negatively impact your credit report.
- Length of Credit History: A long credit history indicates that you can manage your credit responsibly and wisely. This is a positive indicator in your credit report.
- Defaults: If you have made any default in repaying your loan or credit card dues or entered into any settlement, it gets reflected in your credit report. This can significantly dent your credit score. Further, if your credit report shows the status ‘Wilful Defaulter, Suit Filed’, then you will face a hard time getting any credit facility from any bank or financial institution.
Summing Up
Regularly checking your credit report is a proactive and wise step toward financial health and stability. It makes you aware of your credit standing, helps you make informed financial decisions, protects you from fraud, and allows you to maintain a positive credit history. By monitoring your credit report, you take control of your finances effectively. It also ensures that you are well-positioned for various financial products at affordable rates and better terms. Taking care of your finances and managing credit wisely can go a long way toward building a great financial future.
Start taking control of your financial well-being and open doors to several opportunities with Koshex. It is a pioneering platform that allows investors to build wealth and improve their financial standing over the course of time. Additionally, you can invest in mutual funds, fixed deposits, smart deposits, and digital gold and build a well-diversified portfolio on a single platform. With over 5000+ mutual fund options, Koshex offers a mutual fund for each type of investor. Apply with Koshex today!
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