Checking My Credit Report Affects My Credit Score? Or Not?

We know how important a credit score is in our everyday lives especially in our ability to take loans. Did you know it is equally important to check your credit score at regular intervals? There are a number of reasons to do so – some of them are to keep a track on your credit standing and take necessary steps to improve or maintain the credit reports and credit score. While we all know that checking your credit score is important, one thing that bothers a lot of consumers is if checking their own credit report will hurt their credit scores. We are breaking down the entire process to give you a crystal-clear view.

What does ‘credit report check’ or credit score check mean?
A credit report check, also known as an inquiry for credit score is either done by you or by the potential lenders of loan or credit cards such as banks, NBFCs and other financial institutions. A bank checks your credit score usually when you apply for a loan or a credit card to know the creditworthiness of the applicant. Further, a bank can also check your credit history and credit score while you are a loan or card customer of the bank to monitor its portfolio of customers.

Credit Report Check shows or not Hard Inquiry Vs Soft Inquiry
A credit report check or a credit inquiry can be classified into a hard inquiry or soft inquiry. Hard inquiries occur when you apply or request for a new credit card or a new loan or a line of credit like increasing the credit limit on a card. Such inquiries leave a footprint on your credit history and show up on your credit reports. Too many hard inquiries over a short duration have a negative impact on your credit score, especially if the credit keeps getting denied.

Hence, it is advisable to limit your applications for credit card or loan. Make sure you’re only applying for credit only when it really is necessary. Select a credit card and a bank after doing research rather than blindly applying for credit with many banks. Want to know about the ways that can positively impact your Credit Score? Read our blog, “4 ways to Build a Great Credit Score.”

On the other hand, soft inquiries occur when an individual checks his own credit report and credit score. These are the type of inquiries that do not show on the reports, no matter how many times you check your credit report. Even if these appear on your credit report, these will never affect your credit score despite you checking five times in a single day.

When you are pre-approved for a special credit card offer or personal loan, it is very likely that the Bank would have carried out a soft inquiry on its existing customer base, such as you. Banks periodically review its existing pool of customers for assessing risk of its loan portfolios and finding out good customers whom to make pre-approved loan offers. Since these are soft inquiries, you do not need to worry on any negative effect of these checks on your credit score.

If you want to still keep a record of the inquiries just to stay more informed about them, CRIF can help you with the annual credit report with details of hard inquiries in your credit report.

Keep a check, always.
Consider your credit scores as a pie that represents your financial being. Your pie is divided into slices, each of which constitutes of different factors. One large slice is your timely payments, another is your length of credit history and yet another is total credit used. And then there is a tiny slice which represents your hard inquiries. It is essential to control your hunger and not to bite this slice. This diet won’t help you to lose weight but can definitely help you gain some points on credit score. It is essential to keep your credit on a check as it gives you an accurate position of your credit standing.

To ease out the hassle of keeping a check on your credit score, you can contact CRIF. It is an RBI-approved credit information bureau that gives trusted and accurate results of the credit score.

How I Raised My Credit Score By 250 Points

I had already unfolded the climax in my previous blog, on how I was being denied higher education due to my own credit mistakes. This blog is essentially the return of the hero who fights with bad credit and lives happily after with a great credit score.

850. That was the number printed on my latest CRIF Credit Report. Read ahead to know – How I Raised My Credit Score By 250 Points.

Credit Score = Trust?

One of the premises of a civilization or society is its need for safety. It is because of this need for safety from the wild did the early human start forming communities. Humanity has evolved and advanced a lot from them, but the basic need for safety is perennial. It is very important to have those few trustable companions or entities who make us feel safe.

Since the age of the Kings and the Landlords, the practice of lending also pivoted around the similar element of trust. Lending has transformed from being a local, personal referral based activity now into a very large industry backed by digital systems and a sense of trust emanating from the use of data sciences. The industry allows instant lending and peers to digital peer-to-peer lending on basis of data-backed trust that the person taking the credit will pay back after the pre-defined time. This data-backed trust comes from the “credit scores” provided by the Credit Bureaus by understanding behavioral patterns from the millions of records of individuals such as you and me.

I realized that I had to improve my credit score from 500 so that a bank can begin trusting upon me to repay its money. In my quest to improve, I began analyzing my credit report against the five major factors that form the basis for a credit score. And voila, I had devised a clear plan of action to seize control of my credit situation-

  • Payment History : my credit report clearly reflected my negligence around making payments towards my credit card dues. I would generally pay up money only after many follow-ups from the credit card companies, perhaps this was one of the most important factors barring me to pursue my dreams. I immediately cleared pending dues on all of my credit cards and vowed to now pay full dues at least 3 days prior to the due date.
  • Age of Credit : I had 4 credit cards. Since now I have to pay on all cards in time, I decided to close 3 of these cards. I decided to maintain the oldest credit card I had, as the higher age of credit means a better credit score.
  • Credit Utilization : The average spend on each of these 4 cards was nearly 80% of the assigned credit limit. This meant that the credit utilization ratio was 80%, which ideally should be 30-40%. The credit card I chose to retain was linked to my salary account. My banker helped me get the credit limit of this card increased. This enabled me to enjoy higher credit just with one card, but have a low utilization. I crossed my heart to not use above 25% of the allowed credit limit at any point.
  • Type of Credit : I pledged to explore a car loan (secured loan) and diversify from just having credit cards (unsecured loans). And the next year when I had a slightly better credit score, I took two additional loans, one for buying a car and the other for buying a laptop and paid them off in the same year. This allowed me to add different types of credit as well as provide better evidence of my credit behavior.
  • Number of Credit Inquiries : This did not seem to be a problem for me, however, I have since then avoided unnecessarily applying for credit cards or loans.

12 months of discipline had helped me improve my score from mid 500s to 670, it helped me get a car loan — but it wasn’t enough to help me fulfill my dream. After another six months of care, my credit score was above 750 and I was packing my bags to leave for an MBA. All I needed was a basic understanding of credit score and discipline to follow my plan. Last month I repaid my education loan but still continue to follow the rules I set for myself 5 years ago. As you read my story, let me tell my credit score as of today stands above 850.

Today, in parts of the world, your credit score can stand in your way of getting accepted as a tenant, employee or even spouse. Hence it is becoming paramount to manage your credit score to maintain your credibility not just for getting loans but for fulfilling your dreams.Don’t let your ignorance hamper your dreams.

Get Educated and Educate Others. Journey to happy credit starts here – CRIFHIGHMARK CREDIT REPORT

About the Author: Subhankar Mishra works as Service Delivery Manager at CRIF High Mark, India’s largest Credit Bureau database.

Banking Ombudsman

Did you ever fight with your elder brother during your childhood? Whom did you go for the resolution? Your mother, right. However, we are sure that many times, you would have reached out to your father against the resolution made by your mother. Our families implicitly carry their own mechanisms to address and resolve complaints or grievances.

Given the number and the variety of interactions we engage with banks today, some of us are likely to have complaints or grievances against the services offered by the banks. Though such hierarchy for resolving complaints and disputes comes naturally into our homes, Reserve Bank of India (RBI) has defined such hierarchy for redressal of customers grievances through Banking Ombudsman Scheme, 2006.

According to the said scheme, any person who has a pending complaint against his bank in terms of deficiency of services or in respect of loans taken or not following fair practices etc may file a complaint online with the Banking Ombudsman appointed by RBI to get the issue resolved. RBI has appointed about 20 senior officials as Banking Ombudsman, one in-charge for a one or more states, for assisting you with your complaints.

The guidelines require the complainant to first exhaust the grievance redressal avenues within the bank such as writing to bank’s customer service desk or to the bank’s nodal officer and then only approach the Banking Ombudsman. The complainant may approach Banking Ombudsman in case he has not received any reply within a period of one month of the complaint or the complainant is not satisfied with the reply given by the bank.

While the Banking Ombudsman Scheme 2006 covered almost all types of banks operating in India, the RBI recently announced an Ombudsman setup for NBFCs for helping consumers with complaints against any service deficiencies of large NBFCs.

How about complaints on your credit report?
You may notice an error in your credit report which may be affecting your credit score as well, and thus your ability to take a loan for your needs. Since CRIF deals with a large amount of data emanating from many banks and other financial institutions and further, in respect of many borrowers, an inadvertent mistake in your credit report cannot be ruled out completely. Read more to understand how credit bureaus work.

Whenever you face such a situation, you may write to us highlighting the discrepancy along with the unique Report ID on the right top corner of your CRIF Credit Report. If you wish to enclose supporting documents, you can write to crifcare@crifhighmark.com. Our customer team ensures that your concerns are heard promptly. Technical issues, if any, are addressed at the earliest and a revised credit report is thereafter issued at no extra cost to you.

In case the issue is with the data provided by the bank to CRIF, we forward the issue to the concerned bank requesting a correction. At the same time, CRIF also requests you to directly take it up with the concerned bank to help expedite the correction. CRIF continues to follow-up with the concerned bank to support you with this correction. As soon as CRIF receives a confirmation for correction, we update our records and share a revised CRIF Credit Report with you.

Even though CRIF strives to offer best standards of customer service, in case you are not satisfied with the response from our customer service desk, you can escalate the matter to CRIF Nodal officer by writing to nodalofficer@crifhighmark.com.

If you do not hear from CRIF or the bank within a reasonable time of 30 working days, you can also approach the Banking Ombudsman for the said discrepancy.

Always at your service! Read FAQs on Banking Ombudsman