Your credit report and credit score is one of the most important things that lenders consider to gauge your financial health and creditworthiness. It can affect your chances of credit approval as well as the terms on which you avail credit. Keeping a regular tab on your credit report can help you identify errors and discrepancies on time and take action to correct them, make appropriate financial decisions and even avoid unpleasant surprises later on.
The following are a few key reasons why you should check your credit report regularly and how it can help safeguard your financial well-being:
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Detecting Errors and Inaccuracies in your Credit Report:
One of the most critical reasons to check your credit report regularly is to spot any errors or inaccuracies in your credit report. These may range from administrative errors such as errors in personal information, outdated accounts, etc. to fraudulent activities and identity thefts.
When you check your credit report, look for any inquiries or accounts that you don’t recognise. Even a small, unexplained charge may indicate fraudulent activity. Keeping a regular eye on your credit report can help you identify these at the earliest and report them to the concerned credit bureau to avoid further damage.
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Know the Effect of your Actions on your Credit Score:
Your credit score is a major factor in determining your financial future since it affects your ability to secure more credit in future. Even minor fluctuations in your credit score may have some major consequences. Therefore, reviewing your credit report regularly is a crucial step in understanding the factors that affect your credit score and taking steps to improve it. Your payment history, credit utilization and the length of your credit history are the key factors that make up your credit score. By checking your credit report regularly, you can keep a tab on these areas and find out areas that require improvement.
In other words, monitoring your credit report regularly can help you identify the effect of your actions on your credit report and credit score. It can help you find out if your actions are affecting your credit score positively or negatively. For instance, in case your credit utilization is high, you may decide to pay down some debt or in case you have missed payments, you may work to make these payments and avoid delinquencies in future.
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Prepare for Major Financial Decisions:
Checking your credit report regularly can help you gauge your financial health and make better financial decisions. It can help you assess if everything is in place before you apply for new or additional credit. In case you notice any red flags, you can take appropriate action to resolve them before they negatively affect your chances of approval or cost you more money in the form of higher interest rates.
For instance, if you wish to buy a home, get a car loan or apply for a new credit card, your credit report will play a key role in the process. Lenders usually make an inquiry on your credit report to assess your financial history and ascertain if you are good enough to secure more/new credit. If there are inaccuracies or negative information on your credit report it can negatively affect your ability to secure new credit or result in higher interest rates.
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Find Out Better Credit Card and Loan Offers:
Checking your credit report regularly and knowing your latest credit score can also help you find better credit card and loan offers available in the market. When you check your credit score on aggregator platforms, you get customized pre-approved loan and credit card offers. Moreover, a higher credit score indicates a higher creditworthiness and lets you secure additional credit on better terms. In other words, it gives you an edge or greater negotiating power when you apply for new credit.
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Know What Lenders See:
Financial institutions such as scheduled banks and lenders make a hard inquiry on your credit report when you apply for a loan or credit card. Understanding what they see when they review your credit report might help you have a better idea about how lenders assess your creditworthiness. Regularly reviewing your credit report can help you evaluate your financial standing from the lender’s perspective and understand what aspects of your credit report require improvement. This proactive approach may help you match the lenders’ expectations and increase your chances of securing new credit and on better terms.
Checking your credit report regularly is an important practice that can help you maintain good financial health and creditworthiness. From timely identification of fraud to improving your credit score and making sure that the information on your credit report is accurate, there are various advantages of reviewing your credit report consistently. Try and review your credit report at least once a year or more frequently if you are planning a major financial move in recent future to make smarter financial decisions.