Credit score is a three-digit numerical representation of your credit history, and lenders consider it to judge your creditworthiness while processing loan and credit card applications. Those with higher credit scores have higher probability of loan and credit card approval. A higher credit score can also help save money as lenders are increasingly factoring in credit score while setting interest rates for loan applicants. All these have increased the importance of fetching credit reports at regular intervals. It is equally important for you to regularly check your credit report and take corrective steps for improving your credit score.

Here are some important pointers to look for while evaluating your credit report:

Check your credit card and loan accounts

Your credit report lists all your loans and credit cards, including those closed within the last five years. Lenders use this information while evaluating your credit-worthiness. Thus, any error or wrong reporting of these credit facilities can adversely impact your credit score and your future loan eligibility. Hence, check your loan and credit card details to ensure they have been accurately reported. Contact the bureau or the concerned lender on finding any missing or unrecognized transactions/accounts.

Look out for unknown credit report inquiries

Your credit report records both soft and hard inquiries. Hard inquiries refer to the credit report requests initiated by the lenders for processing your credit card or loan applications. Soft inquiries refer to self-initiated credit report requests and those initiated by the lenders for judging your eligibility for pre-approved loan and credit card offers.

Credit bureaus reduce your credit score on receiving a hard inquiry. Soft inquiries, on the other hand, do not reduce your credit score. Avoid making direct loan or credit card applications with the lenders for comparing various loan and credit card offers. Instead, visit online lending marketplaces to find the best deal available on your credit score and other eligibility parameters without impacting your credit score.

Report unknown hard inquiries in your credit report to the credit bureau and the concerned lender as that can be a sign of fraud or identity theft.

Confirm the loan and credit card repayment details

Credit bureaus list repayment history of your loans and credit cards, highlighting whether they were repaid by the due date or otherwise. Lenders closely study it to predict your future repayment behavior and approve your loan application accordingly. Carefully compare missed, part- and late payments listed in your credit report with the statements of your credit card and loan account as any wrong information in your credit report can reduce your credit score.

Find out your credit utilization ratio

This ratio states the proportion of the total credit card limit used by you. For example, if you have three credit cards with credit limits of Rs.100000, Rs.90000 and Rs.80000 and outstanding balances of Rs.30000, Rs.14000 and Rs.10000, your credit utilisation ratio would stand at 20%. Lenders consider borrowers with credit utilisation ratio of more than 30–40% as credit hungry and hence, default prone. Hence, you must try to avoid exceeding credit utilisation ratio beyond 30–40%. Ask for a credit limit increase or apply for an additional credit card if you regularly exceed the said ratio.

Check whether you have a balanced credit mix

The term ‘credit mix’ refers to the ratio of your secured and unsecured credit availed by you. Lenders usually prefer lending to borrowers having higher share of secured loans, such as home loans, car loans, loan against property etc. and hence, credit bureaus too score such borrowers higher. Thus, if you are planning to prepay some of your existing loans, start with your unsecured loans first to increase your credit score. Consolidating your existing debt by replacing the unsecured loans with secured ones would also increase your credit score.

Written By Radhika Binani, Chief Products Officer of