As soon as you apply for a loan or credit card, lenders fetch your credit report from the credit bureaus to evaluate your credit worthiness. Any error or incorrect information in your credit report can lead to rejection of your credit application. This makes it imperative to develop the habit of reviewing your credit report periodically. Doing so has not one but many benefits.

Explained below are 5 reasons to check your credit report at regular intervals, especially before submitting your credit application.

1. Gives a fair idea about your creditworthiness

Credit bureaus compute credit score on the basis of information provided by lenders and card issuers, regarding your loan and credit card repayments. This makes it imperative for you to periodically check your credit report, especially before submitting application for any form of credit, be it loan or credit card. Checking your credit report beforehand would give you a clearer picture of your credit score, and you can take corrective steps to improve it, if required.

2. Timely detection of credit report errors

Any error on part of the lender or credit bureau is capable of harming your credit score, as well as future loan eligibility and approval prospects. Always check your credit report and identify errors, if any, and have them rectified. Some of the possible errors in your credit report include-

# Error in credit account details

As your credit report lists all active and recently closed credit accounts based on the information provided by lenders, any wrong reporting can adversely affect your credit score. Check your loan account and credit card details to make sure it is updated and free from errors. Immediately contact concerned credit bureau in case you find any missing or unknown accounts/transactions in your credit report.

# Error in credit repayment details

Lenders predict your repayment capacity and behaviour on the basis of your repayment history. Hence, it is important to carefully check whether your missed, delayed and part prepayment is accurately listed in the credit report. Remember that incorrect information can lower your credit score by a few points.

# Error regarding personal information

Your credit report contains personal information including your name, contact number, PAN details, communication address etc. Any kind of mismatch in personal information in your credit report and credit application may result in rejection of your credit application. Reach out to concerned credit bureau in case you spot any clerical error or mismatch in personal details.

3. Spot unknown hard enquiries in your credit report

Every time lenders pull out your credit report from the bureaus on receiving credit application, it is treated as hard enquiry. Such lender initiated enquiries can lower your credit score by a few points. Since submitting multiple enquiries, especially within a short span of time can adversely affect your credit score, consider routing your loan application through online financial marketplace. While financial marketplace also source your credit report from the bureaus, such enquiries are treated as soft enquiry, and doesn’t lower your credit score.

Always check your credit report for any unknown hard enquiry as this may be a sign of either clerical error, or possible fraudulent activity through identity theft.

4. Helps check whether your credit utilization ratio is within 30%

Credit utilization ratio (CUR) is the proportion of credit used by you against the total credit limit available to you. Given that financial institutions generally prefer lending to those maintaining CUR within 30% of the total credit limit, breaching this mark not only lowers your credit score but also depicts you as a credit hungry consumer making you prone to default. If you tend to frequently breach 30% mark, either request your lender for credit limit enhancement or consider opting for an additional credit card.

5. Helps in maintaining a balanced credit mix

Lenders prefer lending to borrowers with higher proportion of secured loans (home loan, loan against property and car loan), than unsecured loans (personal loan, education loan or loan against credit card). Credit bureaus tend to favourably score borrowers with balance credit mix. In case you have a higher proportion of unsecured credit than secured ones, either consider prepaying your unsecured loans, or opt for loan consolidation by replacing unsecured loans with secured ones, and move towards balanced credit mix, which is also likely to have a positive effect on your credit score.