Why You Must Understand How to Read CIBIL Report Before Submitting a Loan Application

When you apply for a loan or credit card, the lender will immediately obtain a copy of your credit report from one of the three major credit agencies in order to determine your eligibility for credit. It’s possible that your credit application could be turned down if your credit report contains any mistakes or inaccurate information. This makes it vital to cultivate the practice of knowing how to read CIBIL report periodically. This action results in not just one but a number of positive outcomes.


The following is a list of the top five reasons why you should check your credit report at regular intervals, particularly before filing an application for an important loan.


  1. It gives an accurate representation of your creditworthiness.


The information that creditors and card issuers supply to credit bureaus regarding a customer’s history of making payments on loans and credit cards is used to calculate the customer’s credit score. Because of this, it is absolutely necessary for you to check your CIBIL report on a regular basis, and you should do so, especially before applying for any form of a loan. If you check your credit report ahead of time, you will have a more accurate picture of your credit score, and you will be able to take the necessary actions to enhance it, should that be necessary.


  1. Timely identification of mistakes on credit reports


If you understand how to read CIBIL report, you will see that any mistake on the side of the lender or the credit bureau has the potential to damage not just your credit score but also your eligibility for future loans and your chances of getting approved for them. Always make it a habit to monitor your credit report, and if you find any inaccuracies, get them fixed as soon as possible. Your CIBIL report may contain a number of mistakes, including the following:


# Incorrect information regarding the credit account


Any incorrect information that is included in your credit report can have a negative impact on your credit score. This is because your credit report shows all of your active and recently closed credit accounts based on the information provided by lenders. Verify that all of the information associated with your credit card and loan accounts has been updated and is free of any mistakes. This is possible only when you know how to read CIBIL report. In the event that your credit report contains any accounts or transactions that are missing or unknown to you, you should immediately contact the relevant credit bureau.


# Error in credit repayment details


On the basis of your previous repayments, lenders will make assumptions about your ability to make payments and your behaviour. As a result, it is essential to review your credit record thoroughly to ensure that any missing or delayed payments, as well as partial prepayments, are listed appropriately. Keep in mind that providing inaccurate information can result in a few points being deducted from your credit score.


# An error occurred with the confidential information


Your CIBIL report includes personal information about you, such as your name, contact number, PAN data, communication address, and other similar characteristics. Your credit application could be denied if any of the personal information in your credit report and the information you provide on the application are inconsistent with one another. In the event that you discover a clerical error or a discrepancy in your personal information, you should contact the relevant credit bureau.


  1. Identify any unknown hard enquiries that have been made on your credit record.


A hard enquiry is recorded in your credit report whenever a lender pulls your credit report from one of the agencies in response to a credit application they receive from you. Your credit score can drop a few points as a result of these inquiries performed by the lender. Consider submitting your application for a loan through an online financial marketplace in light of the fact that doing so might have a negative impact on your credit score, particularly if repeated inquiries are made in a short period of time.


Even though financial marketplaces also obtain your credit report from the agencies, this type of inquiry is regarded as a “soft inquiry,” and it will not have a negative impact on your credit score.


Always examine your CIBIL report for any unknown hard enquiries, as these could be an indication of either a clerical error or possible fraudulent conduct resulting from identity theft.


  1. Assists in determining whether or not your credit utilisation ratio is within the acceptable range of 30 percent.


Just like it’s important to be aware of how to read CIBIL report, it is important to know the calculation of CUR too. Your credit utilisation ratio, also known as your CUR, is the ratio of the amount of credit you have used to the total credit limit that is available to you. A breach of this mark not only lowers your credit score but also depicts you as a credit-hungry consumer, making you more likely to default on your financial obligations. This is because financial institutions generally prefer to lend to those who keep their credit utilisation ratio (CUR) within 30 percent of the total credit limit. If you tend to go above the 30% level on a regular basis, you should either seek an increase in your credit limit from your lender or think about applying for an additional credit card.


  1. Contributes to the upkeep of a well-balanced credit combination


Lenders would rather give money to borrowers who have a higher proportion of secured loans (such as a mortgage, a loan against property, or a car loan) than borrowers who have a higher proportion of unsecured debts (personal loan, education loan or loan against credit card). Borrowers who have a balanced credit mix typically receive higher scores from credit bureaus. If you have a greater proportion of unsecured credit than secured credit, you should either consider prepaying your unsecured loans or opt for loan consolidation by replacing unsecured loans with secured loans in order to move toward a more balanced credit mix, which is likely to have a positive effect not only on your credit score but also on your CIBIL report.

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