08-April-2015 written by : FSI-Team
An evolutionary change was experienced by Indian financial markets with declaration of New Economic Policy in 1991. Indian markets opened their gates for foreign countries. Entry of foreign firms brought in technology, job opportunities and fierce competition in business world. These conditions worked in favour of consumers by providing them with good quality and increased standard of living. A paradigm shift was recorded in demand for luxurious goods over necessary ones, evident of increase in average level of income.
As business world was experiencing the stage of growth and expansion, the demand for cash flow was going on increasing. Thus, at this time the concept of credit was brought into picture. Credit concept revolves around the process of lending financial help to borrowers which the borrower has to repay after stipulated period of time. To go with the entire protocol, whenever an individual needs financial help he approaches the bank for credit by filling an application form. Although many agencies are involved in this process, prominent among all are Credit Bureaus, to whom application details of borrower are sent. The Credit Bureau verifies all the details of the borrower and checks his credit report. Thus after determining the creditworthiness of an individual, the decision whether to lend him loan or not is made.
Thus, credit report plays a significant role in determining a borrower's creditworthiness. This report consists of bills paid, unpaid debts, borrowings done by an individual from lenders, banks, creditors etc. A credit report also reflects upon the ability of an individual to repay his loan and time taken by an individual to repay that loan. To provide ease in maintaining details of expanding subscribers for credit, credit score was developed.
Among all the factors considered for while determining the interest rate on loan, credit report occupies the apex position. Apart from time-saving factor, a credit report provides accurate and detailed information about borrower and hence many companies prefer an overview of credit report before going for credit relationship with firms or borrowers. An individual's credit report is updated monthly as transactions occur.
Although credit report has proved instrumental in making finances available for business as well as for individuals, every year number of users experience errors in their credit report. Thus, it is advisable to do a thorough check of your credit report at least once a year. Checking of your credit report provides you with an overview of your financial transactions and helps you to convert your bad debts records into positive records by informing you about the errors and assisting you to take corrective measures which will gradually improve your credit worthiness. Checking of your report also helps to avoid cases of identity thefts, as all transactions can personally be verified by an individual.
In this era of digitization you don't have to personally visit any institution for credit check report. Mere clicks on the internet and you can get free overview of your credit report. Similarly, if you plan to start your own business or decide on buying your dream house, the first thing your creditors are going to look at - is your credit report, hence it is advisable to check your credit report first before taking the plunge in such cases.
To sum it up, credit report reflects your credit worthiness in the financial world. By constant reviewing and checking it, you can ensure that you have strong and steady finances.