Why Is It Important to Check Your Credit Report and How Often?

An individual’s credit report and credit score indicate their creditworthiness, and lenders assess these two vital pieces of information to analyse the risk involved for them in lending money to the borrower. A credit score is a numerical representation of a credit’s attitude towards credit. It is a three-digit number between 300 and 900 that indicates a potential borrower’s financial well-being as well as their chances of repaying a loan on time.  

The credit report is a detailed document that tells lenders about a potential borrower’s current and existing debt or loan accounts, how they have handled debt so far, their payment history, etc. The importance of credit reports in ensuring quick loan approval and fetching one the best terms and conditions on a loan cannot be denied. If you are planning to avail of a loan, you must check your credit report at least six months before beginning the loan application process so that you can take corrective measures, if need be.  

Here’s Why You Must Check Your Credit Report Regularly

Now that we have established the importance of credit reports in the loan process, let us look at why you must check your credit report regularly.  

You Can Spot Errors and Get Them Rectified in Time

Credit information bureaus use the information availed of from various lenders to create a borrower’s credit report. Sometimes, lenders pass on wrong information and this leads to errors creeping in your credit report. If the misinformation is identity-related, lenders will have a difficult time getting access to your credit report. On the other hand, if the error is related to your spending habits or payment history, your credit score will take a toll. If your credit score goes below 750, you will find it difficult to get approved for a loan. You must check your credit report from time to time and immediately report any errors. Rectifying these errors and for the changes to reflect in your credit score can take a few months. So, you must check your credit report often and report errors as soon as possible.  

People Also Read: How to Check, Calculate, and Improve CIBIL Score? 

You Can Take Corrective Measures on Time

You must check your credit report regularly and if you realize that your credit score is below 750, you must take corrective measures immediately. To improve your CIBIL score, pay all EMIs and credit card bills on time, reduce your credit utilization ratio, clear small debts and limit applications for new loans. Please keep in mind that it takes time to improve your CIBIL score. Be ready to be patient; it will take at least six months for all these corrective measures to reflect in your account. Borrowers must check their credit report often so that they can start taking corrective measures immediately, if need be. It is also important to check your credit report regularly to understand how a missed or delayed EMI payment affects your credit rating.  

Also Read: Check CIBIL Score with PAN Card for Free, in 3 Steps 

It Helps Reduce Chances of Identity Theft

A report published in 2015 stated that in 2014, 1042 million fell prey to identity theft. What is identity theft in the credit world, you ask. When fraudsters steal a borrower’s personal information and avail of credit on their name, it is known as identity theft. By checking your credit report regularly and analysing it for suspicious entries, you can reduce chances of loan theft. Check your report from time to time, check each entry and make sure there are unauthorised transactions under your name.

So, how often should one check their credit report? In our next section, we answer this question that many borrowers have.

How Often Should You Check Your Credit Score?

When a lender enquires about a borrower’s credit score, it is known as a hard enquiry. Too many hard enquiries negatively impact a borrower’s credit rating. On the other hand, when a borrower checks their credit score or asks for their credit report, it is known as a soft enquiry. Soft enquiries do not impact a borrower’s credit rating. Borrowers often get confused between soft enquiries and hard enquiries and therefore, do not check their credit score often. So, let us clear this misconception once again – soft enquiries do not impact a borrower’s credit rating. So, how often can I check my credit report, you ask. Borrowers can check their credit score as many times as they like. Ideally, they should check their credit score at least once every year. If they plan to avail of a loan, they must check their credit score every six months.

Also Read: Ways to Check Your CIBIL Score Online 

How to Check Your Credit Report

While there are websites that perform CIBIL score check free, these websites cannot be entirely trusted for accuracy. Therefore, it is advised that borrowers should check their credit score on the official website of CIBIL.  

To check your CIBIL score with an Aadhar Card or PAN card, simply follow these steps: 

• Go to the official website of TransUnion CIBIL and select the option ‘Get Your CIBIL Score’.
• To be able to see your CIBIL score on TransUnion CIBIL, you will have to pay a fee. If you want to check your credit report regularly, select a subscription plan.
• Provide basic details, such as your date of birth, email address, phone number, etc. You will also need to create a password for your account.
• If you are checking your credit report by PAN Card, enter your PAN details. Otherwise, enter your Aadhar details.
• Verify your identity by answering all the questions.
• Enter your account by paying a small fee based on the plan you have chosen.
• Login to your account and fill out the CIBIL score display form.
• TransUnion CIBIL will tell you your credit score and send you a detailed credit report in your account.

People Also Read: How to Check Your CIBIL Score for Free in India 

Final Words

Your credit report and credit history play a crucial role in determining whether you will be approved for a loan as well as the terms and conditions, including the rate of interest, you will get on your loan. If your credit score is 750 or above, availing of credit will be easy. On the other hand, if your credit score is below 750, lenders will certainly second guess their decision to give you credit.

Borrowers must check their credit report at least once every year to make sure their credit score is what it should be. If they are planning to apply for a loan, they must check their credit score at least once every six months and take corrective measures in time to ensure quick approval and beneficial loan terms and conditions.