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What is a Credit Report?

A credit report is a record of your past and current debts. It includes information about various types of credit accounts you may have had in the past, your payment history and certain other information, like credit limits. It plays a significant role in determining one’s ability and credibility to avail of a loan, be it for any purpose. Read on to know all about the importance of credit report.

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Why is Credit Report Important?

The credit report is the only source of information that can be used to calculate your CIBIL or credit score – a 3-digit number often used by lenders to determine whether or not you have the ability to repay the loan. Thus, it is one of the first things that financial institutions will ask for before sanctioning loans or approving credit cards.

Also Read: What is CIBIL Score?

A high credit score typically indicates that your credit report includes positive information. A low credit score, on the other hand, implies the presence of negative information. The higher the credit score, the greater your chances of getting a loan approved.

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What All is Included in a Credit Report?

A credit report contains the following information –

  • Identifying information - Name, address, DOB, employment details etc.
  • Credit account information – Types of accounts, account history, loans and credit cards, opening date of the account, credit limits, account balances etc.
  • Inquiry information – The two types of inquiries, ‘’soft’ and ‘hard’. A soft inquiry is when an agent checks the CIBIL score to approve them prior to a financial offering. A hard inquiry is when a financial institute or lender requests to review the credit report as part of the application process. These are known for adversely affecting your credit score.
  • Bankruptcy - Bankruptcies usually remain on your credit report for about 7 to 10 years, based on the type of bankruptcy.

How to Compile a Credit Report?

Here is how a credit report is compiled –

Creditors share your debt details with the credit bureau, which updates information in your credit report. Much of the information on loan accounts and credit cards is typically updated monthly but that depends largely on the creditor.

Also Read: How to Check CIBIL Score?

Other types of businesses usually do not update their credit report with monthly payments. However, they might inform the credit bureaus of the same in case you lag in payments.

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How to Check and Monitor Your Credit Report?

It is essential to review all the information in your credit report periodically to ensure accuracy and positivity. You should monitor your credit report more frequently, particularly if you doubt falling prey to identity theft. Besides, you might also check the report more often in case you are aiming to repair the credit or are expecting to apply for a loan soon.

Also Read: How to Check Your CIBIL Score for Free?

So, now that you know why credit score is so important, know that it is always a wise decision to report any suspicious activity or mistakes in the credit report. You can also get in touch with the authorities of both the credit bureau and the company for more clarity.

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