01-Aug-2018 written by : FSI-Team
A credit report is a repository of all your financial information including your credit card and loan accounts and the payment history. Lenders review your credit report to analyse your past repayment behaviour and gauge the risk associated with lending you money. It is important to check your own free credit report once every year to see how your financial behaviour appears to the lender. If you are checking your report for the first time, you may wonder what exactly you need to review. Here are 8 tips on how to read your report like a lender.
1.Check your report from all the three credit bureaus- There are three main credit bureaus in India-Experian, Equifax and TransUnion. Each of these credit rating agencies maintain their own version of the credit history and calculate the credit score as per their proprietary algorithm. Some lenders do not report credit information to all the bureaus. Also there may be a difference in the reporting timings of these lenders. A prospective creditor may use any of these credit reports to form an opinion about your credit risk. Hence you must check all these reports for accuracy and report any discrepancies to the bureau. You are entitled to a free credit report once every year from each of these agencies.
2.Make sure that your personal information is correct- Check your personal details like name, address, date of birth, telephone number etc. for errors. A wrong address may be a sign of identity theft or mixing of credit files. Even minor spelling mistakes in your name or any other identity information can get you into trouble. Many a times misspelt name leads to someone else’s credit activity being reported on your report. Hence errors must be notified to the bureau immediately.
3.Make sure that all the accounts listed are your own- The credit history section of your report lists all the open and closed credit accounts and your track record of paying them. Make sure that all the accounts listed belong to you. Check the creditor’s name and account numbers. See whether you have only one kind of credit or a mix of revolving and instalment accounts.
4.Review payment history and balance outstanding – Check out your balances, loan amounts and credit limits to make sure they are accurate. Check the payment information to determine whether you are paying the debts back on time. What is your highest balance on the credit card? Are you overly dependent on credit? How much of your credit card limit are you using each month? Are there any charge offs?
5.Review the accounts that have gone for collections- See whether there are any accounts that haven’t been paid on time. Accounts that are overdue for more than 90 days go for collections and affect your credit profile negatively. A periodic check of your credit report helps in bringing to notice those unpaid accounts that you missed paying by mistake. If you notice any collection accounts, contact the creditor and chalk out a plan to pay off the debt immediately.
6.Public records- Negative information section records information relating to court judgements, liens and bankruptcies. Such information on the credit report increases the risk of the lender. Make sure there is no negative record that does not belong to you.
7.Enquiries- This section mentions who all checked your credit profile in the last 2 years. If too many hard enquiries are reported the lenders get a signal that you are in desperate need of credit and are applying with multiple lenders. If you haven’t been applying for credit but see too many enquiries you may want to alert the bureau and put a freeze on your account to prevent identity thieves from opening accounts in your name.
Disputing mistakes- If any information is found inaccurate it should be reported to the bureau immediately. The bureau will verify the information from the lender who reported it and update the records accordingly. One can also contact the creditor directly so that he does not continue to report wrong information.
A clean credit report will ensure that you have an excellent credit rating. This will help you qualify for new lines of credit and low home loan interest rates. If you know how to read your report, what it contains and how to monitor it, you will be better equipped to manage your financial life.