If you are a credit card user or even if you are not, you would be knowing the importance of a credit score. It plays a very important role when you apply for a credit card/loan and the card issuers have to make a decision on it. Your credit score is calculated on the basis of the information available on your credit report. People often confuse between their credit reports & credit score and they don’t know what they need to check regularly. If you are also going through a similar confusion in your mind, you have come to the right place. We will help you understand what you should check regularly and why. Keep reading for further information:
Difference Between Credit Score & Credit Report
A credit score is a three-digit number, ranging from 300 to 900, which helps card issuers understand the creditworthiness of an individual. Card issuers or lenders can use it to give you pre-approved credit card offers and to understand your basic eligibility. But once you apply for a credit card, your detailed credit report is checked. The credit report is a detailed document that contains information about all your past & present credit accounts and your credit behavior. It tells the card issuers about your payment behavior, your credit utilization ratio, the age of your credit accounts, and other factors that build your credit profile.
Should You Check your Credit Score or Credit Report?
When you check your credit report, you also get your credit score along with it most of the time. So, you should not think of checking only one of them, but credit score, as well as report, is very important. The credit score tells you how much you have improved your credit-related habits and the credit reports give you a detailed analysis of the same. There are many websites or portals that offer free credit score checks, like Paytm, Cred, and many more. So, you can check your credit score every month as it takes only a few seconds. Talking about the credit reports, you can check them once every two-three months. Every credit bureau provides you with one free credit report every year and there are four major credit bureaus in India. So you can check your credit reports for free four times every year, i.e. once every quarter and that is enough. Just make sure to check these reports thoroughly to understand your mistakes and improve them.
Why Is It Important To Be Updated With Your Credit
There are many reasons why you should check your credit report, as well as your credit score regularly, and the following, are a few important ones:
- You understand how your credit score is built only when you check your detailed credit report. You can see each and every factor that affects your credit score and work accordingly to improve it.
- You come to know about the mistakes you are making so that you can avoid them in the future and save your credit score from dropping down.
- It is rare, but sometimes there might be some errors in your credit report, which you will never come to know if you don’t check it thoroughly. So, you should check it wisely and get such errors disputed so that your credit score doesn’t get affected.
- Fraudsters might have opened some credit accounts in your name, which can affect your credit history badly. If you check your credit reports, you can close such accounts and file a complaint against them, otherwise, they will just keep making payment defaults in your name.
It is not the right question to ask whether you should check your credit score or credit report. You should instead ask how often you should check these. You can check your credit score every month, however, checking credit reports once every quarter would be fine. But, make sure not to ignore them as it helps you maintain a good credit report and improve it. Keep all the factors in mind that affect your credit scores, especially payment behaviors. And keep checking your credit reports regularly without fail. If you have any further doubts, feel free to ask us in the comment section below!