Credit Report: A step-by-step guide to read credit score report in detail

Going through a credit report in detail may seem a complex tax initially, but breaking down the information is much simpler. By learning how to navigate your credit report, you can improve understanding of your credit usage. This will also help you to spot errors or inconsistencies that could unfairly drag down your credit score.

At its core, your credit report serves as a detailed record of your credit history. It plays a big role in determining your credit score and influences various financial decisions made by various lenders.

What is a credit score and credit report

The credit score is a three-digit number that summarises your credit history. It is derived from the information contained in your credit report, also known as Credit Information Report (CIR). This report contains your payment history across various loan types and financial institutions, detailing everything from home loans and car loans to credit cards and personal loans.

Your credit score is calculated based on your credit behaviour, specifically reflected in the ‘Accounts’ and ‘Enquiries’ sections of your CIR. This score ranges from 300 to 900, with anything above 700 generally regarded as good. Understanding these scores and reports not only prepares you for the loan application process but also enables you to manage your credit instruments more effectively. You can check your credit report on digital platforms like Moneycontrol for free. The Moneycontrol app offers credit score reports for free to all users.

So, let’s delve deeper into the details of your credit report and find out how you can make it work for you.

Understanding your credit report

• Profile Information: This section of your credit report contains personal details, including your name, date of birth and gender, as reported by various financial institutions. It also includes identification information such as your PAN, passport number, driving licence and voter ID. In addition, it provides up to four addresses, detailing whether each is residential, official, permanent or temporary. Accurate personal information is crucial, as discrepancies can lead to complications in your creditworthiness assessment.


• Credit Score: Your credit score is a critical component of your credit report. This score, which ranges from 300 to 900, is primarily used by lenders to assess your creditworthiness. A score above 700 is generally considered good and indicates that you are a low-risk borrower. The closer your score is to 900, the more confidence lenders will have in your ability to repay loans, increasing your chances of approval.


• Account Information: The account information section is one of the most significant parts of your credit report. It details all your credit accounts, including loans and credit cards. This section lists the names of lenders, types of credit facilities (home loans, auto loans, credit cards, etc.), account numbers, the status of accounts (single or jointly held), dates when accounts were opened, the last payment made, the loan amount, current balance and any overdue amounts. It also includes a month-on-month record of up to 36 months of your payments, which can provide insight into your payment history and habits. In cases of disputes, a yellow box above the account details indicates that a section is under dispute. This information will be removed once the dispute is resolved, but the outcome may vary depending on the lender’s confirmation.


• Contact Information: Your credit report also contains a section dedicated to contact information. This includes up to four addresses and telephone numbers provided by various lenders. Ensuring that this information is correct is essential, as incorrect contact details can affect your communication with lenders.


• Employment Information: The employment information section provides insights into your income as reported by lenders. It details your occupation and the income level at the time you opened a credit account. If you notice unfamiliar company names or employers, this could indicate a potential issue, such as identity theft, and should be addressed immediately.


• Enquiry Information: Each time you apply for a loan or credit card, the lender accesses your credit report and this action is recorded under ‘Enquiries’. This section lists all enquiries made by lenders regarding your credit applications, including the name of the lender, date of application, type of loan and its amount.

There are two types of enquiries:

• Soft enquiries: These occur when you check your own credit. Soft enquiries do not impact your credit score.


• Hard enquiries: These happen when lenders check your credit after you apply for a loan or credit card. Unlike soft enquiries, hard enquiries can cause a slight dip in your credit score, usually by a few points.

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Why credit reports matter

Credit reports serve as an essential snapshot of your financial health. They play a major role in determining your eligibility for mortgages, credit cards, insurance and the interest rates you might receive. A good credit score can simplify the approval process for loans while ensuring lower interest rates and better loan conditions.

In contrast, a poor credit score may limit your options, leading to higher interest rates, increased insurance premiums and even denial of loans or new credit instruments. Understanding the credit report equips you with the knowledge to improve your credit score and avoid pitfalls that could harm your financial standing.

Regularly checking your credit report

It is advisable to review your credit report regularly for errors or signs of identity theft. Common errors include:

• Unfamiliar accounts or numbers


• Incorrect addresses


• Listings of former spouses on accounts


• Misreporting of account status, such as delinquency

If you find discrepancies, you can dispute these inaccuracies with the credit bureau, providing documentation to support your claim.

Conclusion

In conclusion, understanding how to read your credit report is very important for maintaining a healthy credit score. Regularly monitoring your credit reports helps identify potential identity theft and fraud, allowing you to make informed financial decisions. You can also check and verify details of your credit report on the Moneycontrol app and website.

If you are looking for quick access to funds, you can also explore the personal loan options available on the Moneycontrol app and website. You can check personal loan offers from top lenders that offer loans up to Rs. 15L at interest rates starting at 12% per annum.