Banks approve loans only to a few people because banks decide whether to give you a loan or not based on your credit report.
Everyone has financial needs, but banks approve loans only to some. This is because banks decide whether to give you a loan or not? How much interest should they charge? Based on your credit report, banks are now increasingly relying on scores from bureaus like CIBIL, CRIF High Mark, Experian, and Equifax to evaluate customers. These scores usually range from 300 to 900.
Banks consider a score above 750 as a strong score and a reliable customer. If the score is lower than that, you may have to pay higher interest or your loan may be rejected. That is why you should manage your credit score carefully. Even small mistakes can seriously reduce your score. That is why you should check your credit report regularly. Let’s see what precautions you should take for this.
Why review a credit report?
Every customer can get one free credit report per year from each bureau. However, many people never check them. Mistakes often happen. Data-entry errors, banks not updating quickly, and mismatched information from banks can all impact your credit score. If you catch them early, you can avoid losses.
Dev Patel, quantitative research analyst at financial services company ‘1 Finance’, spoke to ‘Mint’ and explained the importance of credit score review. Mistakes like entering customers’ personal details incorrectly, reporting EMI payments late, and showing a loan account as open even though it is closed are common, Dev said. He said regular review is necessary to identify these issues early and prevent unnecessary reduction in score. He advised customers to check their report at least twice a year.
Four Common Errors
Incorrect personal information: Mistakes like misspelling names, old addresses, and incorrect PAN details can create confusion. Your profile can be linked to someone else’s profile. If these mistakes persist for a long time, your credit score will decrease significantly.
Wrong Repayment History: Even if you pay your EMI on time, if it shows as delayed in the report, your score will be affected. Such mistakes happen when banks do not update your payment records promptly.
Closed Loans in Active: Sometimes a loan account that you have paid off in full may still appear to be active. It may appear that you are using more credit than you actually have. Financial institutions may think that you are taking out more loans. Checking and reporting this will not cause any harm.
Duplicate accounts: Accounts that you did not open or loans that you did not apply for may also be in the report. If this is the case, it should be considered fraud. You should file a complaint immediately.
What should borrowers do?
Make sure to check not just one, but all four credit bureau reports. If you find any error, file a complaint immediately through the bureau’s online portal. Maintain all repayment records like bank statements or NOCs.
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