A credit report provides in-depth information about an individual’s credit history which is created by credit bureaus in a country. Credit bureaus collect financial data of individuals and prepare credit reports based on that information. Further, this information is then passed on to the lenders (Usually Banks and NBFC’s). The reports along with various other information are used to determine the eligibility of loan applicants which helps in processing of loans. If one’s Loan and credit card rejected? A credit report is the main reason
Credit reports generally include personal information such as current and previous addresses of an individual, PAN Card number, Date of birth and employment history, etc. These reports have summarized details about an individual’s credit history. It includes a number of bank accounts, credit card accounts, whether the individual is negligent of his/her debts.
The credit card report informs whether the individual pays credit bills on time. This also indicates all the other information regarding one’s credit standings. Generally, credit reports showcase any negative records for up to 7 years. On the other hand, bankruptcy filings normally are displayed on credit reports for as long as 10 years.
Why is a credit report important?
A majority of organizations use credit reports to get essential financial background information on an individual’s decisions. It is extremely important to set your financial records straight to prevent problems ahead in life. Banks use this information to sanction loans applied by an individual. It is also checked by the bank while issuing auto-loan, credit-card loan, a mortgage loan, etc. Landlords use credit reports to determine whether they should rent their property to someone. One can also determine whether the person is financially stable and can pay off its debts.
Employers check the credit report while analyzing the application. It can also be checked by E-commerce platforms if someone buys an item online. Your credit report influences many aspects of your life. Therefore, it is necessary for a person to be responsible and punctual when it comes to repayment of any loans or bills. If one defaults on any payment, it will have adverse effects on the credit report.
Credit report versus Credit score
A credit report is a record of an individual’s financial history containing information like financial transactions, the number of inquiries, loan default (if any), etc. On the other side, A Credit score is an algorithm which determines credit risk on an individual.
A credit report is independent in itself. Whereas a credit score is entirely dependent on the credit report for its input.
5 points to look at in your credit report
1. Account details:
The account details consist of basic and financial information such as your name, your PAN number, Mobile number, Mailing address, transactional records, etc. however, your report may continue to show your older details in case the lenders fail to update the bureaus about any personal change. Any mismatch in the personal details mentioned in the credit report and credit application will result in the rejection of an application by the bank.
2. Types of credit:
Another important element to check in your credit report is the types of credit in use. It helps determine whether you have a mix of different types of credit. They can be for example credit cards, store accounts, installment loans, mortgages, etc. This also gives an insight into how many accounts you hold in general. Further, it is advisable to avoid opening of new accounts that are not that necessary. This will just increase your mix of credit types.
3. Length of credit history:
The duration for which you have been using credit also has an impact on the credit report. Further, a long credit history (a positive record) is usually more helpful. It assures the lender of the person’s financial creditability. It is recommended to leave the credit accounts open even if they are not in use. This is because the age itself will boost the credit score.
4. The number of inquiries:
This refers to the inquiries made on your account by numerous lenders; it provides information on each inquiry in detail. No lender can request to see your credit report without your consent. If your report mentions a loan that you haven’t applied for then there is a good chance of identity theft. You must immediately get in contact with your bank in such a scenario.
5. Payment history:
Credit repayment history is the most important point you should be focused on your credit report. It includes a history of the borrower and other important points like if the repayments on loans were on time. Lenders study the report and analyze past loans and repayment to study the future repayment behavior of an individual. Any kind of error in this section will affect the eligibility of the applicant. It may also hinder the process of loan sanction.