Common Reasons Your Credit Score Could Be Inaccurate

Mistakes in credit scores and reports are much more common than we realize. Moreover, a large portion of the working population in this country is unaware of the devastating impact these errors can have on their credit if they go unnoticed or are not corrected promptly.

Some of the most common credit report errors include outdated personal information, mistaken or fraudulent accounts, and incorrect account details. These mistakes are usually made by credit data furnishers, who are responsible for collecting your credit-related information, which is then compiled by credit bureaus.

Now that many of you are already aware of what a credit score is, you should also know how it is intricately related to your day-to-day life and why it is important to maintain a healthy credit report card . Essentially, if you can boast of a healthy credit score – ranging from 750 to 900 points – chances are very good that you might end up saving thousands or even lakhs of rupees in the form of interest on loans. Whether you are planning to buy a home, a car, or even a new credit card , your credit score has an immense effect on your loan processing. Not only this, if you are looking for a job, the employer may check your credit score .

But in a country like India, matching data fields such as name, date of birth, address, telephone number, PAN number etc can prove to be a challenge. However, over the years credit bureaus have developed a procedure that is supposed to consider various data fields before making a match.

When information in relation to a person, whose bureau report is to be obtained, is fed into the system, the report is generated on the basis of the best match of the available data. In case two sets of data overlap, the two different accounts are merged into the credit report.

Industry experts say errors can occur at data submission as well as aggregation stage. At the submission stage, it may be the lender's mistake. Details such as names and addresses are manually entered and may be wrong due to typographical errors by the lender's staff. Also, data about credit behaviour, latest status of settlement, latest balance etc may be inaccurate or not match the customer’s understanding of current status.

Sometimes the errors are genuine, but they could also be because of the time lag between data collection and submission of data and updating of account status. Usually, the data comes to bureaus with a one-month lag and, hence, the account status may not be up to date. Then there are delays by call centres. You may have requested the bank to convert a credit card payment into equated monthly instalments. The process may take time and the bank may meanwhile report the amount as overdue.

If the error is due to data submitted by the lender, the bureau will take up the issue with the lender. According to the law, lenders have to come up with formal resolution of a dispute within 45 days of the issue being raised.

Some Common Mistakes To Look Out For In A Credit Report:

Personal Information: This includes details like your name, address, date of birth etc. Making sure that all these details are correct and updated properly will ensure that your credit report cannot be mistaken for somebody else’s.

Missing records: Paying off your dues in time will boost your credit score. Do check that all the payments that have been made are reflected correctly and accurately in the credit score.

Incorrect credit limit in report: At times a credit card issuer raises the limit on a credit card and fails to inform the credit bureau. In that case, the report will show a low credit limit and that would mean that your account might show a high credit utilization ratio. A high credit utilization ratio impacts your credit score negatively.

Records not updated: Many times despite clearing an outstanding loan or a debt, the credit report will still show it as outstanding. Normally banks take a bit of time to update the credit bureau of their cleared debts.

However, if your credit statement shows your cleared debt as outstanding, it will have an adverse effect on your score.

An error doesn’t become a mistake if it is corrected in time. If you fail to catch the errors in your bureau report, it can land you in an unwanted mess. So, make sure that next time you get your credit report, do scan through it properly and check if the data is correct.