Credit Reports: How to Interpret Them and Boost Your Score!
Venkateshwaran Subramanian,CFP?
?Virtual Registered Investment Adviser?Helping salaried professionals achieve their personal and family financial goals?Fixed-Fee-only Financial Planner ? Gerontologist
Introduction
Having a good credit score is essential in today's world, whether you want to buy a home, get a loan, or apply for a credit card. Your credit report is a critical document that contains all the information about your credit history, including your credit score, outstanding debts, and payment history.
In this article, we'll guide you through the process of understanding your credit report, interpreting your credit score, and improving your creditworthiness.
What is a Credit Report? ??
Your credit report is a summary of your credit history that includes information about your credit accounts, loans, and credit cards. It also includes your credit enquiries, payment history, outstanding debts, and any bankruptcies or foreclosures.
Credit bureaus, such as CIBIL, Equifax, Experian, and Crif Highmark, collect this information from various sources, including banks, credit card companies, and other financial institutions.
You are entitled to one free credit report with your credit score from these credit bureaus every calendar year.
Though other sites provide this report free, downloading it from the credit bureau's site directly avoids your data being used and sold by third-party sites.
Why is a Credit Report Important? ??
Your credit report is essential because it provides lenders and financial institutions with valuable information about your creditworthiness. Lenders use your credit report to determine if you're a good candidate for a loan or credit card, and your credit score is a critical factor in the decision-making process.
A good credit score can help you secure better interest rates and loan terms, while a bad credit score can make it challenging to get approved for credit. These can help you achieve financial goals like purchasing a home.
Generally a score in excess of 750 out of 900 is considered to be a good score. However, an individual is very likely to have different credit scores with each bureau.
The difference in scores is because of the variation in the factors taken into consideration while calculating the score by each credit bureau.
According to CIBIL, nearly 80% of loans are disbursed to individuals with a score of 750 or more.
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How to Download and Interpret Your Credit Report ????
To download your credit report, you'll need to visit the website of the credit bureau that generates your report. For example, you can visit the CIBIL website and create an account to access your credit report. Once you've downloaded your report, you can start interpreting it by checking the following details:
The numbers of "days past due" that is reported should ideally be "000" for any of your credit card or loan accounts.
Understanding Your Credit Score ??
Your credit score is a three-digit number that ranges from 300 to 900, with a higher score indicating better creditworthiness. The following factors affect your credit score:
How to Improve and Maintain Your Elevated Credit Score ??
Having a good credit score is crucial for obtaining loans and credit facilities. A higher credit score increases your chances of getting approved for loans, credit cards, and other financial products. Here are some tips to improve and maintain your credit score:
Five Things to Avoid in Your Credit Report ??
Your credit report provides a comprehensive overview of your credit history. It's essential to avoid certain things that can negatively impact your credit report and credit score:
Conclusion ??
Your credit report is a crucial document that provides an overview of your credit history. Regularly download and review your credit report to ensure that all the information is accurate and up-to-date. If you notice any errors or mistakes, report them immediately to rectify them.
Follow the tips to improve and maintain your credit score and avoid the things that can negatively impact your credit report and credit score. With good credit, you'll have better chances of obtaining loans and credit facilities in the future.