The information in the credit report can have significant effects on one’s financial life. It determines how much money we can borrow to pay for our dream home or car and how much interest is charged on those borrowings. These days, insurance companies also offer discounts based on a person’s credit health. Credit reports even affect one’s job prospects as many employers use it to assess the reliability of the prospective employees.
You should review the report periodically to make sure that the people who are accessing it to take decisions that affect you, get a true picture of your creditworthiness. Flawed credit reports have damaging consequences. It brings down your Cibil Score and costs you a lot of money in the long run in the form of high interest rates.
Here are some reasons why you should make it a practice to check your report once every year.
You are planning to apply for a loan
If you are planning a big purchase and thinking of taking a loan for it, you should first check your credit report before approaching any bank. It will give you a fair idea of your credit standing and provide you clues about you chances of loan approval. A credit report affects the amount of money that you can borrow and the interest rates that you have to pay on those borrowings. If you have a history of late payments, high outstanding balance or collection accounts then the chances of rejection are high. In this case you should first work on improving your credit. An unnecessary inquiry on the report which is unlikely to qualify you for loan will further bring your score down.
Your loan application got rejected
If a bank denies you loan because of bad credit, you are entitled to a free copy of your credit report from the bureau from where the bank accessed your report to evaluate your credit worthiness. You must request for the report within 60 days of denial. Analysing the report will help you identify the reasons for rejection. It will provide an insight into what habits you need to change to improve your credit picture. If you’ve been handling your finances responsibly and the denial came as a surprise then the credit report may help to uncover inaccurately reported information.
You are looking at rebuilding credit
If you want to recover from your past credit problems, reviewing the credit report is a good place to start. Your credit report contains data about most of your financial accounts. Analysing how much debts you owe and how much is past due will give you a clear focus on how to fix your credit. You will be able to nail down exactly which factors are bringing your score down.
Just as you keep a check on your credit card bills and bank statements to ensure that everything is in order, in the same way you should check the credit report periodically to ensure it is free from any errors. If you find any inaccuracies regarding the amount you owe or any other payment details submit a dispute immediately. Delays in resolving these issues can have a serious effect on the credit history.
Check for identity theft
Attacks on information databases and identity thefts have become very common these days. You may not even realize that your identity has been stolen for months and years if you do not keep a check on the credit report. It is better to be vigilant about your credit early on because an identity theft can bring an unexpected dip in your credit score and ruin your ability to get loans in the future. Studying the report will help uncover any unusual activity or misuse of identity. If you find accounts that are not yours or transactions that are not made under your knowledge then you may be a fraud victim. Report it to the credit bureau immediately.
Co-signed a loan
If you have co-signed a loan with a family or friend to help them obtain finances then you should keep a close watch on your credit report. Any late payments or defaults on such loan will appear on your report. Periodic checking will warn you and expose problems before a serious damage occurs.
It is better to play safe than regret later. So mark your calendar or set a reminder to check your credit report at least once every year and shield yourself from a lot of risks.