Your credit score report: How to ensure accuracy and maintain a healthy credit profile

The loan type, sanctioned or disbursed amount, current balance, overdue amount (if any), and payment history, amongst others, are the most important fields to look for in the accounts segment. “The review of these fields is important to ensure credit discipline, take corrective actions in case of any delinquencies, and confirm that the details reported by the lender are correct,” says Subhrangshu Chattopadhyay, Director Business Development, CRIF High Mark, a credit bureau.

You should report to the credit bureau for any kind of discrepancies in the credit report.

“Make sure to check credit inquiries in the report. If there are any inquiries you don’t recognise, it could be an attempt at identity theft,” says Adhil Shetty, CEO, BankBazaar.com.

Also read | Want low home loan interest rates? A good credit score helps

Repayment history

This segment contains information like how often you repay your equated monthly instalments (EMIs) or card dues on time. The credit report contains details of all your loans or cards that you have ever taken. “Lending institutions share consumer credit information with the bureau on a monthly basis,” says Chattopadhyay. The credit report is updated monthly post receiving credit data from these financial institutions, he adds.

While the credit history is reported for up to 7 years in your report, the exact duration of credit history available on a credit report can vary based on factors such as the reporting practices of lenders and the specific policies of the credit bureau providing the report. “It's worth noting that certain significant events, such as defaults, loan settlements, or legal actions, may be reported to credit bureaus outside the regular monthly cycle,” says Shetty. These updates are typically recorded as soon as the information is received, ensuring that the credit report reflects recent and noteworthy changes, he adds.

Also explore: Free credit report and regular credit score updates on the Moneycontrol app and website. 

Personal details

This segment in the credit report has details reported by the borrower's existing lenders to the bureau. These include know your customer (name, date of birth, personal IDs) and contact information (phones, addresses).

For instance, “Whenever a borrower updates any details with their lender, the lender reports the updated details to CRIF in the corresponding reporting cycle,” explains Chattopadhyay. He adds, if the borrower claims that certain details are incorrect, then a dispute management process is followed, through which the incorrect details are updated after confirmation from the corresponding lender.

“Each credit bureau has its own specific process and requirements for updating information, and these may vary slightly depending on the credit bureau you are dealing with,” says Shetty.

Credit report inquiries

When you apply for credit, loan refinancing, or request an increase in credit limit, the lender or creditor will perform a hard inquiry, which is documented on the credit report. Typically, all credit reports contain a section highlighting inquiries made by lenders within the last 24 months. “Hard inquiries may temporarily impact the credit score, as they signal to lenders that the person might be acquiring additional debt,” says Chattopadhyay. To ensure a healthy credit profile, it is crucial to be mindful of the frequency and timing of applying for credit which may result in hard inquiries.

“When you access your credit report from any credit bureau, it is classified as a soft inquiry, and it does not have any impact on your credit score,” says Chattopadhyay. These inquiries are also not visible when lenders pull your credit report when you apply for credit, he adds. It is, therefore, a recommended healthy financial practice to frequently monitor your credit report to keep track of your credit history and check for discrepancies.

Also read | The right way to get the first credit card and build a credit history

Credit utilisation ratio (CUR)

The credit utilisation ratio refers to the proportion between the amount of credit you have available and the amount you spend. “It is advisable not to exhaust the entire credit limit on your credit cards, as continually surpassing your credit card limit can have a detrimental effect on your credit score,” says Chattopadhyay.

A lower credit utilisation ratio demonstrates that you are a prudent and responsible user of credit. “It is advised that the credit utilisation ratio should stay below 30 percent,” adds Chattopadhyay.

For instance, if the credit limit on your credit card is Rs one lakh and your average monthly spend comes to Rs 40,000, your credit utilisation is 40 percent. However, if you have two cards with limits of Rs 75,000 each, and your total spend is Rs 40,000, your utilisation is 27 percent.

The lenders view borrowers with high utilisation ratios as potentially riskier. “A high utilisation ratio may indicate reliance on credit and difficulty managing debt, which can make lenders hesitant to extend additional credit or offer favourable terms,” says Shetty.

Also read | Credit card usage at all-time high: Know the risks involved while using it

Steps to rectify in case of any error

The first step in availing your credit report is to thoroughly analyse it to find any errors or anomalies. Once the inaccuracies have been found, you should raise a dispute with the credit bureau in whose report you see the inaccuracy. “It is advisable to provide specific, detailed, actionable information in your communication (for example, trade line details, lender details, exact nature of inaccuracy),” says Chattopadhyay. All bureaus have time-bound dispute resolution mechanisms, he adds. These mechanisms include notifying the lender whom you have identified in your communication as having reported inaccurate information and seeking a time-bound correction.

The next step is to collect supporting documents, such as bank statements, payment receipts, or any other relevant information to contest the errors. “It is advisable to also contact the lender whom you have identified as having reported inaccurate information in your credit report and submit a formal dispute letter with supporting documents,” says Chattopadhyay.

Rectifying credit report inaccuracies is critical for maintaining an accurate and fair depiction of one's credit history. It is important to note that the credit bureau gets customer data from financial institutions and cannot make changes on its own accord.

Now Moneycontrol can help you instantly find your latest credit score, analyse your credit mix and download your credit report for free. Check here for details