Monitor your credit report regularly as improving score takes time

Viewing it often will also help you detect identity theft early

Awareness about the need to monitor their credit report and score is growing among Indian consumers. A report from TransUnion CIBIL says 23.8 million consumers registered with it for monitoring their credit profile for the first time between October 2021 and September 2022. This was 83 per cent higher than the number that had registered between October 2020 and September 2021.

Monitor regularly

Look up your credit report at least once every quarter. “Monitor your credit profile on a regular basis, and not just when you’re taking a loan, to ensure you are always credit-ready,” says Sujata Ahlawat, senior vice president and head of direct-to-consumer interactive division, TransUnion CIBIL.

Going through the credit report regularly will make you aware of a number of issues. One is identity theft. “A fraudster could have impersonated you and taken a loan. Only by monitoring regularly can you detect this problem early and report it to the authorities, the lender and the credit bureaus,” says Arun Ramamurthy, director, digital transformation, branding & strategy, Andromeda.

A borrower may assume he has a good credit score. At the time of taking a loan, however, he may discover it is only average. Had he been monitoring his report regularly, he could have taken steps to improve it. The credit score affects both whether a lender approves a loan application, and the interest rate it charges. Depending on the initial score, it could take two-three quarters or more to improve it.

Monitoring your credit report can make you aware of lapses on your part and issues in the lender’s operations. “There may be a missed payment you are not aware of. A payment you made may not have gone through, or there may have been a delay in processing it,” says Adhil Shetty, chief executive officer (CEO), BankBazaar.com.

Run these checks

One, check your credit score. If it is high, you can be confident about your ability to access a loan anytime you want at an attractive rate. If it is middling or low, work on improving it.

Two, check the record of loans taken and repayments made. “Mistakes happen sometimes. The credit behaviour of another person could be getting reflected in your report,” says Shetty.

Three, in the demographic section, check that your name, date of birth, address, PAN number, and other details have been recorded correctly.

Four, check the enquiry section. “Every time you apply for a loan, the lender makes an inquiry about your credit profile. This information gets reflected here. If you have not applied but an enquiry is reported, it should serve as a warning that someone has tried to misuse your credit profile,” says Ramamurthy.

Five, check the principal outstanding for each loan in the credit report versus your own records. “If there is a discrepancy, it could mean the interest rate has gone up, a penalty has been levied, or there is some other issue that needs to be checked out,” says Shetty.

Take corrective action

If you discover a discrepancy in your credit report, get it corrected. “Coordinate with both, the lender and the credit bureaus, to get the rectification done,” says Shetty.

If your report shows you have missed out on a payment, repay it at the earliest. “Remember your payment history has a 35-40 per cent weight in your credit score,” says Ramamurthy.

There may be dues you have not paid for more than 90 days. Such a loan account gets classified as a ‘write off’. Once you have paid off the due, make sure the ‘write off’ tag is removed from your report.

Your report could also have a ‘settlement’ tag. When a borrower is not able to pay his dues fully, the lender sometimes offers to settle it. Instead of Rs 100, it may agree to take only Rs 70 and settle the account. However, such settlement affects your score. If you want to improve it, pay off the loan in full and get the settlement tag removed from your report.

Keep these in mind

• Repay past dues fully and be regular with repayments in future
• Excessive credit utilisation ratio can affect your score so avoid using more than 40% of credit card limit
• To avoid being turned down, check your eligibility for a card or loan before applying
• Too many applications for loans indicate credit hunger and affects your score
• Keep a balance between secured and unsecured credit (only having unsecured loans could affect score)