Can a credit report mistake raise your loan cost? Expert explains what borrowers should know

A credit report plays a vital role in determining how lending institutions check and assess an individual’s financial creditworthiness. That is why a credit report without any prior history of late payments or loan defaults helps borrowers in securing credit more easily.

This makes focusing on one’s credit history, credit report and credit score indispensable. These three elements, if not managed efficiently, can immensely reduce a borrower's borrowing potential. Furthermore, even minor errors or omissions in one’s credit report can hamper loan eligibility and the interest rate offered by lending institutions.

This write-up is dedicated towards discussing credit report errors and how they can make loans more expensive for aspiring borrowers.

Gibin John, Senior Investment Strategist, Geojit Investments Limited, explained this is detail, stating, “Credit score errors can directly and adversely affect an individual's credit score. Future loan eligibility and the interest rates offered by lenders are closely linked to a person's credit score . Therefore, any inaccuracies in a credit report should be identified and corrected promptly to avoid negative financial consequences.”

Even a financially disciplined borrower can face hurdles if the information used to assess their creditworthiness is not accurate. An unnoticed discrepancy can distort the picture presented to lenders, potentially affecting both loan approval and the terms offered. Not only this, but it can also make future loans expensive and difficult to secure. This makes accuracy in credit reporting an important part of maintaining a healthy borrowing profile.

This makes it essential for all borrowers or individuals who use credit cards to diligently follow their credit reports and check them consistently for any discrepancies. So that any problems can be resolved quickly and amicably in order to conserve an individual’s financial integrity.

John further touched upon this aspect, highlighting, "The errors may include name or address mismatches, loan details belonging to another person appearing in your credit report, incorrect payment history, inaccurate account balances, duplicate entries, and closed accounts still being reported as active. These are some of the most common errors found in credit reports. Although they may seem like minor issues, their impact can be significant and may sometimes lead to a reduction in an individual's credit score."

The real problem begins when an individual’s credit score falls below a set threshold. A lower credit score, particularly below 600, can result in deeper scrutiny and ‘hard checks’, thus making loans more expensive and difficult to secure. Conversely, a score above 750 may be viewed more favourably and could support access to more competitive rates and terms, depending on the lender and other financial factors.

Therefore, it is clear that a credit report is a financial report card.