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Why You Should Check Your Credit Report Regularly

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What is a Credit Report?

A credit report is an official document that contains details regarding an individual’s credit activities and fundamentally keeps track of the credit histories of individuals. Based on the credit report, the credit score is released. For the UAE, the Al Etihad Credit Bureau is responsible for producing both credit scores and credit reports for individuals and companies. 

It is a healthy practice to track your credit activities and keep checking credit scores and credit history on a regular basis. As you go through this article, you will find out more about the significance of checking credit scores.

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What is Listed in a Credit Report? 

A credit report in the UAE consists of four different sections, with each section containing the following details – 

Section 1

  • Credit Score
  • Customer Information: This includes your first and last name, gender, nationality, and date of birth
  • Identification: Your Emirates ID and passport details are mentioned in this specific column
  • Address: Your residential address is stated in this column
  • Employment Details: This part of the credit report mentions your employment status and other related details such as contact numbers
  • Other Incomes: Your other sources of income apart from your regular job or business (if any) are mentioned in this part

Section 2

  • Credit Facilities: Under this sub-category of section 2 of your credit report, details like the total number of facilities, total exposure, credit limit utilisation, worst payment delay, and oldest contract start date are stated
  • Summary: The summary of credit facilities includes the total number of active facilities, total monthly instalments, and total outstanding bills
  • Credit Facility Details

Section 3

  • Loan Details: The third section is all about your present debts and bill payments. Here, your loan details like the type of contract, start and end date, outstanding balance, and others will be mentioned.
  • Historical Data: This part of section 3 includes the historical data of your loan, credit card, and telco service
  • Utility Payment History: It states the billing cycle month and outstanding balance and also shows the status of your payment (whether you have paid the bill amount)
  • Rental Information: Rental information includes the months of your rent payments, outstanding balance, and status of your payment

Section 4

  • Credit Facility Applications: Under this, information related to your application ID, type of facility, date of the last update, total amount, number of instalments, and credit limit would be given
  • Credit Providers: In this part of section 4, you will find details like your provider number, provider name, address, and contact information

Credit Report: Hard Inquiry v/s Soft Inquiry 

Credit report checks can positively and negatively impact financial institutions and insurance companies. The credit score usually doesn’t get affected if an individual makes a soft inquiry. However, in case of a hard inquiry, the credit score gradually plummets. 

Read more to know the difference between hard and soft enquiry in terms of checking credit scores – 

A hard credit report check is done when you apply for the following – 

  • Loan applications
  • Credit card applications
  • Requests for credit limit increase
  • New utility applications

A soft credit report check is performed when you inquire about the following – 

  • Personal credit checks
  • Account reviews by present creditors
  • Insurance applications
  • Pre-approved credit offers

What is the Need for a Credit Report Check?

By now, you must have understood making soft inquiries about your credit score and checking your credit history does no harm to your credit score. Instead, doing so can prove to be beneficial due to the following reasons – 

Helps in Building Credit Score

It is important to improve your credit score with time to ensure that you get quick approvals and favourable terms for your new credit cards, loans, and more. By checking credit score at regular intervals, you can check whether you are efficiently performing your credit activities. 

Upon checking credit history or credit score, you become aware of where you need to improve yourself in order to increase your credit score. You can conveniently monitor your credit performance and proceed accordingly. With this, it becomes considerably easier to apply for credit cards and loans once you possess a good or excellent credit score.

To Stay Updated with the Current Credit Score

At times, some uncertainties may arise for which you may require a considerable sum of money. In such cases, either a loan or credit card can come handy. However, there is no assurance of getting a loan or credit card application approved if you have a low credit score. 

While it is crucial to stay updated with your current credit score, it takes a long time to build a good credit score. However, if you keep checking credit score on a regular basis, it becomes easier for you to improve and analyse how much more credit score you need to get your loan and credit card applications approved.

Helps in Identifying Errors

The Al Etihad Credit Bureau produces credit scores and credit reports by collecting all the essential information from various financial institutions, agencies, and other concerned entities. Albeit rarely, the possibility of entering inaccurate information during this process or while printing information on the credit report remains. 

Such incorrect information can be detrimental as it may result in lower credit scores. You can, however, avoid such a situation by checking your credit report regularly. Doing so will enable you to spot the wrong information mentioned in your credit report and immediately send a request for correction.

Analysing the Credit Utilisation Ratio 

The credit utilisation ratio is simply the ratio of your credit limit and your credit spending limit. As per experts, your credit utilisation ratio should not be more than 30%. By checking credit score and credit history, you can also find out more about your credit utilisation ratio at any given moment. 

It’s worth noting that this ratio plays a crucial role in deciding your credit score. In case you have a higher credit utilisation ratio, you can bring it down it by reducing your utilisation of your credit card or increasing the credit limit. As an alternate option, you can send an application for a new credit card.  

Helps in Detecting Fraudulent Credit Activities

With a shift to online banking and fund transfer, a rise in cybercrime has been observed, especially with several reports of online fraudulent activities being in the highlight. This includes misuse of bank accounts, debit cards, and credit cards as well. Cybercriminals can hack your bank accounts and perform unauthorised transactions to steal money. 

However, by checking your credit history regularly, it becomes easier to keep track of your spending, payments, and other transactions. In case you detect any fraudulent transaction, you would be able to simply reach out to the concerned authority to file a report and take immediate necessary steps.

In a Nutshell

Checking your credit report periodically can keep you updated on your credit status. With this knowledge, you can take decisions to maintain or improve your credit score to get loans, credit cards, and other credit and financial instruments easily. 

It is crucial to know the difference between a soft inquiry and a hard inquiry with respect to credit report checks, as a few individuals believe that checking credit scores and credit history lowers the credit score, while others think the opposite. It is always recommended to make soft credit inquiries regularly to keep track of your credit performance and enhance it as per the present status of your credit report. Just make sure that you don’t go overboard with soft enquiries as well!

 

Credit Score for different types of Loan
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Guide for Credit Scores in UAE

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