The credit report is the document where the credit history of a person is mentioned in detail. There are different credit bureaus in the market today. These credit bureau collects all the credit information and create the reports. Banks or lenders make use of these reports along with some other information to understand the credit worthiness of various loan applicants.
In order to understand the credit report, one must understand the credit score. The score is a number that is based on the credit files of an individual. If you apply for a loan, your credit score plays a very important role. It determines if you are eligible for a particular loan amount, the interest associated with it, etc.
There are several reasons why you must keep a track of your credit report. Some of the reasons for checking your credit report are mentioned below:
- When you are planning to purchase a car or a house – In case you wish to purchase a car or a house and apply for a loan accordingly, the bank or the lender will check your credit report before it accepts your loan application. The data present in your credit report determines the score. This score in turn determines the rate of interest that will be associated with the car loan or home loan. Check your credit report and try and fix all errors on it at least a year before applying for a loan.
- When you rent a place to stay – Property management companies or landlords do not always check your credit report. However, if the landlord or the property management organisation takes a look at your credit score and finds the score to be on the lower side, you might not get the apartment. Even if you get it, the landlord can ask for bigger amount as security deposit. This happens as they might think that you will not be able to pay the rent on time.
- When you intend to make a big purchase – In case you know that some big expense is coming up for you like renovation of the house, you should ask the credit card issuer to increase the credit limit so that you can easily cover up such expenses. In case you credit report looks bad, your card issuer will turn down your request. It is advisable that you maintain a good credit history so that the score looks good on your report.
- When you are looking for a new job – In case you are looking for a job, the company hiring you might ask for your credit report. This mainly happens when you are applying for a job that requires you to handle large chunks of money. If you have credit report issues, you might not stand eligible for the job anymore.
- When you are planning to refinance – In case you have a house or a car and you wish to refinance the loan that you took to buy that car or house at an interest rate that lower than the current rate you are availing, the new lender or the new bank might ask for your credit report. This is required so that the new lender can see if there has been substantial changes in your financial status. The refinancing request may be turned down by the new lender if he sees that the history looks bad on the credit report.
- When you have noticed something doubtful – In case you get a collection call for a different person or receive an email about a credit card that you never applied for, it could be that your credit card information has been compromised. If you carefully take a look at your credit report, you will surely understand if there has been any case of fraudulent activity.
- When you have not checked your credit report in quite some time – You can avail your credit report from CIBIL, Experian, High Mark, etc. at least once a year. It is a good thing to check your credit score from time to time. In case of any discrepancies, you must contact your credit card issuer. It is always good to avail more than one report from different credit bureaus.
Bottom Line – It is of utmost importance that you keep track of your credit score by checking the credit report. It is a good practice to pay your credit bills on time. It takes your credit worthiness higher and makes the credit history look good. It is also good to check your credit report to avoid getting involved in fraudulent activities.