Maintaining a good credit score helps you to run a seamless financial life. A credit score is not just a number but symbolizes your creditworthiness in numbers. If you have a credit score closer to 900, there is more chance for the approval of your loan proposal. The score says how skilled you are in handling credit cards/mortgages/car loans or other lines of credit. But the industrial experts say that 6 out of 10 millennials’ applications are being denied. Experts say that there are different unnoticed errors or discrepancies in credit reports that affect your credit score. Let’s look through the unnoticed error in a credit report.
What are the Different discrepancies found in the Credit Score And Credit report?
- Clerical errors
The first and most common errors found in the credit reports are clerical errors. These errors can occur due to typos errors or entering incorrect credentials. Wrongly entering the date of birth, misspelled name, or invalid phone number are examples of clerical errors. According to a recent survey, the most repeated common errors associated with one’s personal information are wrong address, misspelled name, and wrong address. These errors may cause a lot of confusion. The chance of confusing one person’s identity with another person with the same name may occur. This may look insignificant but minor errors like misspelling can cause some severe problems in the future. So experts advise rectifying the errors shortly will help one to save themselves from future hassles. You can solve this problem by collecting related documents regarding the error and submitting a letter to the credit bureau. The credit bureaus like Equifax, Experian, and TransUnion, maintain an online dispute process where you can report and fix the problem.
- Account-Related Errors
This error occurs when the credit bureau incorrectly records the account status. The account-related should be paid attention to as it might cause several damages like a low credit score. This kind of error occurs in the following scenario:
- It occurs when your closed account entries are not entered in the financial institution’s database. It continues to be reported as an open account.
- Wrong Accounts like late or outstanding debt are listed more than once. Probably with different names.
Why do I Check my Credit Report often?
The best way to avoid errors in the credit reports is to check your credit score and report periodically. This helps to avoid errors and rectify them immediately before causing damage to your credit health.
- Checking it often will help you protect against identity theft.
- It enables you to ensure the absoluteness and accuracy of personal details.
- Having a regular eye on the credit report will help you to track & improve your credit status.
What are the Steps to Rectify Errors in Credit Reports?
- First, Get an online dispute form from the respective credit bureau’s website. Fill out the form with the required information and submit it to the credit bureaus.
- After submission, The bureaus will verify the report and send it to the respective banks, NBFCs, or licensed lenders for further examination.
- Banks cross-check the error report and sent the audited report to the concerned agency. In case of no error, the agency may call you with a modified error.
- Whereas if they find any errors, the banks will correct them internally and send the revised details to the concerned agency.
- Finally, the credit bureau will share the updated report.
Here Are Other Factors That Affect Your Credit Score:
- Reckless Payment Behavior:
The payment history has a significant impact on your credit score. So it is mandatory to pay your credit card bill or any loan EMI at the correct time without any defaults. According to CIBIL analysis, a 30-day delinquency can decrease your credit score by 100 points. In case of multiple credit cards or loans, you can set alerts to remind you to make correct payments without missing payment. These errors will hardly affect your credit score.
- Having a High Credit Utilization Ratio:
Another thing you should look at is your credit utilization ratio. The ratio is the amount of used credit in proportion to the available credit limit. According to professionals, it should not exceed 30% of your credit limit. If you have high credit exposure, the lenders may point you at a higher risk of default.
- Minimum Amount Due:
The chance of falling into a debt trap is more if you frequently pay only the minimum amount due. If you pay only the minimum amount, it may result in high-interest compounding on your outstanding credit. So better pay your credit card bills in full.
- Avoid Multiple Credit Applications:
Every time you apply for a loan or credit card, the bank checks your creditworthiness by looking through your credit report. In the case of multiple applications, it will indicate that many credit inquiries are happening at the same time. Too many hard inquiries may negatively influence your credit score. They will indicate you as a credit-hungry person. So it is advisable not to apply for a credit card or loan or any other line of credit soon after a rejection. Take a frequent gap between each application to maintain your credit score.
- Credit Mix:
It is advisable to have a healthy balance of secured and unsecured loans. For instance, you can avail of any secured loan like home loans and auto loans with an unsecured loan like credit cards. Maintaining a healthy mix of different types of loans will indicate you as a good person at handling both secured and unsecured loans.
- Long Credit History:
Long credit history will enable the lenders to make a favorable decision while providing you credit. It is advisable to start building a credit history in the earlier stage of life before opting for a bigger line of credit such as a home or car loan as it paves the way to a good record of credit transactions.