Friday, 21 April 2017

Can Annually Checking Your CIBIL Report for Errors Actually Help You?

Rajat Sareen is a 28 years old IT engineer working in one of the most reputed software companies of the world. He is considered as a valuable employee of the company and is also responsible with his credit usage as well. He makes sure he pays the EMIs of his land mortgage loan and higher education loan on time, and also keeps his credit utilization under 30% (which is the threshold percentage of credit utilization for a good score). However, he has never checked his credit score himself, not even once. He believes that it’s not necessary to check credit score for a good credit report.
Rajat is not the only one. Many people overlook the importance of checking their credit score from time to time. However, this robs them of the benefit of a much better score. This is because, printing mistakes and discrepancies in the CIBIL reports are two of the most common reasons behind low CIBIL score. Many people start working hard to improve CIBIL score, when in reality they could have done so by simply getting a few mistakes corrected.

Won’t Checking my CIBIL Report Lower my Score?
It is a popular misconception that has been floating around, which is that checking your own CIBIL report can have a negative impact on your score. Truth is that you can check your own credit report as many times as you want, and it will never affect it negatively. This is because this type of enquiry is called a “soft enquiry”.
However, when lenders, such as banks and NBFCs make a formal enquiry on your credit report, which is usually when you apply for a loan or a credit card, then it’s called a “hard enquiry”. This does have a negative impact on your credit report. In fact, if multiple enquires are being made back to back then it can have even greater impact on your score. This is because this only happens when you apply for a loan at many banks at the same time, and they all make enquiries on your credit report. This reflects a credit-hungry behaviour, which puts you in a bad light, and hence credit bureaus deduct your score for the same reason.
Advantages of Checking your CIBIL Report
There are numerous benefits of checking your own CIBIL report from time to time. These are:
1. Credit Score Monitoring
One of the most important things that you must do to ensure your score remains high is to check on it from time to time. This way, if you notice that your score is dropping then you can find out the reason and prevent further damage before the situation has gone out of your hands.
2. Improve Credit Score
As mentioned earlier, discrepancies and errors in your credit report can cause a huge damage. Thus, if you find any, you can have them corrected by contacting your bank or the credit bureau itself. As soon as the changes are made you can observe a boost in your credit score.
3. Keeping Loans in Check
Your credit report can also serve as your financial report that you refer to for getting an understanding of where you stand. You can easily find out about your total pending debt, the money paid in your loans to date, and other details of your bank accounts and credit cards, etc. Thus, you won’t have to create a separate report for tracking your expenses.
Every credit user must check their credit report at least once a year. Although, it is recommended that you do that every 2-3 months. It is a really good habit that will help you in the long run.

When checking your credit report make sure you get it from the official credit bureau and not from a third-party website, most of which provide credit reports for free. This is because only the credit bureaus can provide the most accurate reports which are also referred by the banks and other lenders. 

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