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Why you should get that credit score

The RBI recently directed all credit institutions to provide one base level consumer credit information report (CIR) free of cost every year to individuals whose credit history is available with them, with effect from January 1, 2017. Even if you are not planning to take a loan, for which a credit report is mandatory, here is why you should avail of your free copy anyway.

Your credit information report contains details of your credit history and track record in taking and repaying loans from banks and financial institutions. By annually accessing your credit report you can ensure that the information reflected is accurate. Says Harshala Chandorkar, chief operating officer of Cibil, “If you find any discrepancies in the information, get it corrected by approaching the credit bureau through its online dispute resolution forum.”

According to Mohan Jayaraman, managing director of Experian Credit Bureau, errors in personal information do not affect one’s credit score directly but could signal a possible fraud such as identity theft. Incorrect personal information could also be a precursor to more errors. It is imperative for consumers to check their report periodically for any discrepancies.

Your credit report provides a comprehensive view of all your loans and credit cards. “It is a useful tool to monitor performance on all your loans. It also provides a snapshot of your credit cards—the ones you own and the ones you may have provided to your spouse or children as add-on cards,” says Chandorkar.

Again, there is room for error. As Aman Kapoor, chief engagement officer at Credit Sudhaar, says, “In your report you could find a loan that you have never taken but is reflected under your name. This could have a negative impact on your overall score since you not repaying it.” Take steps to rectify the error immediately.

Reviewing your credit report tells you how financially healthy you are. It tells you how much debt you hold, how you are faring when it comes to repaying loan EMIs and credit card dues and how often you have app lied for a loan or a credit card in the past. Credit reports can also provide information on detrimental flags like “Settled”, “Written-Off ” or “Suit Filed” against your loan accounts. The credit health check-up helps you take corrective and preventive measures.

In case you are a new credit consumer, focus on your report to build a healthy history. “Apply for a credit card and carry out small monthly transactions. Pay the full amount each month. It takes three to six months of credit activity before a credit score can be calculated for a new consumer,” says Jayaraman. You must be prudent with your repayment to establish yourself as a responsible consumer.

“Individuals should monitor their credit score and report from time to time. Just like your regular health check, you must also run a financial health check to maintain financial stability,” says Chandorkar.

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