Last year, 33-year-old Raman Kumar, a Bangalore resident, applied for a personal loan for his sister’s wedding. However, he soon learnt that his application was rejected by the bank due to a low credit score. On checking his credit report, Raman found out that his credit score had been dipping since the last few months because a wrong credit account with outstanding balance had been put under his name.
What happened to Raman can happen to anybody, and hence, it is critical to keep checking your credit report. It will not only help you track your credit score and build it over time, but also enable you to spot any error in the report immediately. Here is a list of common credit report errors that you need to look out for:
1. Incorrect Payment history: Continuous late payments or outstanding dues do the biggest damage to your credit score. This may also happen when a lender reports a credit activity incorrectly. For instance, they may report delay in payments even when you had paid the dues on time; or report outstanding balance, which in fact has been paid off.
2. Wrong personal Information: Your personal details in the credit report may have clerical errors, like mistake in the spelling of your name, address or PAN. While they do not impact your credit score, but a mismatch between your documents and credit report is likely to lead to a rejection of your loan or credit card application.
3. Duplicate entries on the same credit account: Duplicate entries usually appear in your credit report when you transfer your loan from one lender to another. Often your outstanding is shown twice, both against your present and former lenders’ names, doubling your actual debt. This can drastically impact your credit score.
4. Mistaken Identity: Sometimes a credit account of another customer appears under your name in your credit report. This generally happens because of similar names, address or incorrect account details, like PAN number. If you see an incorrect credit account displayed in your credit report, report it to your lender immediately to get it resolved.
5. Delay in credit and payment update: Sometimes, when the credit limit on your credit cards is extended, the bank misses or delays reporting it to the credit bureau. In such a case, when you start spending more through the credit card, it leads to a higher credit utilization ratio, which may lead to a drop in your credit score. You should also check if your monthly payments have been updated in your credit report.
6. Fraudulent account or transaction: Make sure to carefully go through each account and check if they were made by you. Identify theft for a credit card is not uncommon. If you find any unknown account or transaction under your name, make sure to report it to your bank and also to credit bureau.
(By Radhika Binani, Chief Products Officer, Paisabazaar.com)