Most people resort to borrowing money at some point in their lives. You too may have availed a loan, or maybe planning to do so. Whether it is a home loan for building your dream house, a personal loan for meeting your emergency personal needs, or an automobile loan to buy your preferred vehicle, loans make it possible to fulfil your financial goals more easily.
That said, it is not always easy to avail a loan with competitive terms and conditions. This is because banks and financial institutions look at your credit score and your credit history before deciding if you are eligible for a loan.
A credit score is a three-digit number that is calculated by credit information companies like the Transunion CIBIL, Equifax, Experian and CRIF Highmark. Of these, the CIBIL score is one of the more popular metrics. Credit scores like the CIBIL score indicate how creditworthy an individual is. The higher the credit score, the more creditworthy you are.
CIBIL scores, for instance, range from 300 to 900. A CIBIL score over 750 is considered good by lenders. So, if your score is above this mark, you will find it easier to get loans at competitive lending rates.
You can check your credit score for free online. Despite this, not many people keep an eye on this number. The credit score is a part of a larger report, called the credit report, which contains key information like your repayment history, your credit mix, your past and present loans, your credit cards, and so on.
Here are the top 7 reasons to check your credit report and score periodically.
Every bank and financial institution has a cut-off credit score to determine whether a borrower is capable of repaying their loans on time. In the case of CIBIL scores, as mentioned above, lenders typically consider scores above 750 as good enough. So, you need to ensure that your credit score is always in the green zone and does not drop below this limit.
This is one of the foremost reasons to check your credit score. By getting to know where you currently stand on the credit rating scale, you can take any measures needed to improve and maintain your score. On the other hand, if you do not track this score regularly, you may not know if your credit rating has fallen.
Just like how it is important to monitor your health regularly, it is also essential to keep track of your financial situation. This is another reason to check your credit report and score regularly. Your credit history and credit score greatly influence your financial situation. For instance, a good credit score makes it easier for you to avail a home loan or an auto loan.
This, in turn, will make it easier for you to achieve your financial goals as per your plan. On the other hand, if you do not have a good credit score, you may have to put off some financial goals, or borrow loans from the unorganised lending sector. These loans come with steep interest rates, and they could worsen your financial situation over the long term.
Although the credit bureaus in the country do an excellent job of keeping score, your credit report may occasionally contain an error. For instance, a loan you closed may not be marked as repaid in your report. Or a new credit card you applied for may not be reflected therein. Spotting such errors on time is another reason to check your credit report and your credit score at regular intervals.
In case there is any error, you can contact the credit bureau and the relevant bank or credit card company right away. If the error is genuine, it will be rectified promptly, and your credit score will go back to reflecting your true financial situation.
One look at your credit score and credit report will give you a better idea of whether your repayment habits are excellent or poor. If you have a good credit score, it means that your current financial habits are in the right zone. And you just need to continue doing whatever you’re already doing if you want to maintain your credit score.
But if your credit score is not very good, it may be a sign that you need to regulate your financial habits and change them for the better. You can check your report to see which areas you are weak in. Perhaps you have a tendency to delay your credit card dues, or perhaps, you’ve used too much of your credit limit. This is another one of the many key reasons to check your credit score and your credit report on a regular basis.
If you already have a loan or a credit card, you may have availed it a few months or years back. Naturally, the terms and conditions of these credit facilities will be based on what your credit score was like at that point in time. But if your credit score has improved since then, chances are, you may be eligible for lower interest rates or a higher credit limit.
So, another one of the 7 reasons to check your credit report and score regularly is to stay updated about your credit eligibility. You can use this knowledge to get a credit card with a higher limit, or to consolidate your loan and avail lower interest rates.
If you diligently monitor your credit score, you will notice any immediate or short-term changes much sooner than someone who does not track their credit report regularly. So, in case you notice any fall in your credit score, you can quickly take corrective measures that may be needed.
For example, if your credit score changes for the worse because you made too many credit enquiries, you will be able to notice on time and ensure that you don’t continue this in the future. This is another essential reason to check your credit score regularly.
Lastly, merely by studying your credit report periodically, you can get more insights into how credit scores work. You can learn more about what factors influence them. This information can help you plan your finances more efficiently.
On the other hand, someone who has never checked their credit report will not have any idea about how to improve credit score or maintain it. So, by checking your credit score and your report, you can learn all about what affects your credit worthiness and work on the areas that need improvement.
As you can see, checking your score periodically is important. The 7 reasons to check your credit report and score regularly, as outlined above, should help you understand the significance of this number. If you are not sure how to go about checking this metric, you can visit Bajaj MARKETS to check your credit score.