A lender generally uses a loan or credit card applicant’s credit score to evaluate the person’s eligibility to avail of these facilities. The lender also factors in the person’s credit score while fixing interest rate for loan repayment. Therefore, it is essential for borrowers to maintain good credit scores. To do so, one can fetch one’s credit report at regular intervals.
Benefits of Checking Credit Report Regularly
Some of the key benefits of regularly checking your credit report are:
1. Know the Effect of your Actions
Checking credit score regularly can help you monitor your financial actions. This way you’ll know if your actions are affecting your credit score positively or not. If you know what may bring down your credit score, you will be able to avoid that and get better offers on personal loans, home loans, etc. in times of need.
2. Ensure Accuracy of Information
Sometimes a low credit score can be the result of an error/ inaccuracy of information in your credit report. If that’s the case, you should report it immediately to the concerned credit bureau as well as your bank to get it corrected.
3. Know Better Credit Card or Loan Offers
If you know your latest credit score, you can find better credit card or loan offers available in the market. A high credit score increases your credit-worthiness and lets you access additional credit on better terms. In short, it gives you negotiating power when applying for a loan.
7 Critical reasons to check your Credit Report regularly
In this piece, we look at why it is vital to check one’s credit report regularly.
1. Stay Updated On Your Creditworthiness
Having a good credit score is one thing. Maintaining it is another aspect altogether.
If you are applying for a loan or a credit card, among the first thing lenders do is to check your credit score to determine your creditworthiness. Recently, many employers in the financial sector have started using creditworthiness as a parameter in their recruitment process.
Checking your credit report every month helps you stay updated on your credit status, current balances, payment history, and also shows you credit information that a potential lender can see.
2. Keep your credit in good shape
In school, you could neglect your homework for weeks, then cram for a test and ace it. Credit scores don’t work that way. If you have an application coming up, you can’t get your credit score ready over a few days. Instead, it takes months; years even to build up a good credit history. Monitoring your credit score puts you in control of your credit and makes you more accountable for keeping your credit score at its best.
3. Identify Clerical Errors
Credit bureaus generally create credit reports based on the data provided by your credit card issuer and lender. Any clerical error on the part of the credit bureau or lender in collating such information might result in incorrect data in your report. Such inaccurate data can curtail your credit score, and may negatively impact your future eligibility for a credit card or loan. Checking your credit report periodically alone is the way to spot such errors. On detecting any error or wrong information, you must report it to the bureau or lender concerned for correction. A corrected credit report will help you improve your credit score.
4. Detect Identity Theft
Generally, identity theft refers to the deliberate misuse of an individual’s personal information to conduct financial transactions. It often happens that fraudsters use wrongfully obtained data to submit an application for a loan or credit card in someone else’s name.
As your credit report records all the credit-linked enquiries and transactions, a periodical review of your report would help identify fraudulent credit enquiries or transactions, if any, in your name.
5. Know when you might qualify for better Credit Card offers
As your credit score improves, you have a better chance of being approved for credit cards with better interest rates, rewards, or other perks. Or, you can use a strong credit score (and better credit card offers) as a bargaining chip to request that your current credit card issuers lower your interest rates. If your credit card issuer won’t agree to lower your rate, consider applying for a 0-percent balance transfer credit card a better credit score will improve your chances of qualifying.
6. Avoid unnecessary Hard Enquiries
Every time you submit a credit application, the concerned issuer or lender will fetch your credit report from the credit bureau to assess your creditworthiness. Such credit report enquiries initiated by the lender on receiving a loan or credit card application are considered hard enquiries. Moreover, credit bureaus reduce one’s credit score by a few points each time one raises a hard enquiry. Multiple hard enquiries in a short period can lead to a significant reduction in your credit score. Fetching your credit report does not disturb your credit score.
This way, you must check your credit report before availing of any loan or credit card to get a reasonable idea of whether your credit score is adequate to get you a loan or credit card approved.
7. Control Credit Utilization Ratio
When you check your credit report habitually, you tend to keep your credit utilization ratio under control. This ratio is the percentage of the total credit limit availed by you during a month. According to experts, you must try to maintain this ratio within 30%. Going beyond can make you look credit-hungry, and less creditworthy for a lender.