Over the past couple of years, you may have come across emails and messages that ask you to check your credit score and get a credit report for free. It might have left you wondering about the importance of checking your CIBIL score. A survey by The Economic Times asserted that about 74% of Indian consumers checked their CIBIL score at least twice a year. It was observed that around 29% of the survey respondents checked their CIBIL score to improve it and 28% to prepare for a new loan application.
When applying for a loan, lenders and financial institutions view your credit report. Your credit report is the equivalent of your financial resume. Your credit report notifies them of your credit history, like the debt you owe and timeliness of your debt repayment. It is therefore important that you keep your credit score in check. Let’s start with a brief about the basics of CIBIL or credit report.
Also read how credit monitoring works only at Finserv MARKETS
What is a credit score and a credit report?
A credit report, in a nutshell, is a historical record of your financial consistency with respect to your credit and payments. It includes your debt obligations, including your credit cards, overdrafts, and any kind of loan, like home, personal, business, etc. Mostly, people don’t even realize that even buying a mobile phone on installments is a type of credit that can consequently affect your credit score.
Your credit score, on the other hand, is a three-digit, easy-to-understand, summarized form of your credit report. Typically, your credit score ranges from 300-900 and the higher your score, the more probability you have for getting your loans approved at lesser interest rates.
Why do people disregard their credit scores?
There are two broad reasons why one might disregard their credit score:
- There is a common myth that when you check your credit score, you risk lowering it. However, when you run a check on your credit score, it is a ‘soft inquiry’, which in no way harms your credit score.
- One the other hand, a certain amount of people do not regard the credit score to be as important and omit the step of the CIBIL score check completely.
Why is decoding credit scores important?
Decoding your credit score is important for the following reasons:
1. It indicates your financial health
Your credit score makes you understand where you stand. Similar to how you monitor and take adequate care of your physical health, it is important that you keep your financial health in check. Irrespective of your score, it is important that you know it so that you can try harder to improve it.
2. It helps you in maintaining your score<
We know that having a bad credit score may affect your chances of getting loans. However, if you are aware of your present credit score, you can take the necessary steps to boost it gradually.
3. Helps you identify errors
You can monitor the accuracy of your CIBIL report by checking your credit score regularly. At times, it may happen that even when you are paying off your loan on time, it is not reflected in your credit report, thereby reflecting a poor score. By checking your CIBIL credit reports regularly, you can monitor any error that is lowering your score.
4. Helps you get better deals
Lenders use your credit report to evaluate your creditworthiness. If your credit data is accurate, it may result in a hassle-free loan approval. Being aware of your credit score also gives you an upper hand in the application of loans. You get higher interest rates, more flexible loan repayment tenures and no collateral obligations.
5. It goes beyond loans
You’re already aware that having a low credit score may affect your possibility of getting loans. However, it is beyond that. It not only affects the chances of getting loans but also affects your insurance rates and your employment opportunities. Typically, insurers create an insurance score that is based on your credit score. Employers too are practicing this somewhat controversial practice of checking applicant’s CIBIL credit score before employing them.
Where to get a credit report from?
You can check your CIBIL score and credit profile on the CIBIL website. Experian and Equifax are some more reliable companies to check your credit information from.
On Finserv MARKETS, we provide you with a free Financial Health Check Report that has your entire financial analysis in a single report. Your Financial Health Check Report will not only contain your CIBIL score but insights on improving your financial stability to help you make prudent decisions towards maintaining your financial well-being.
Checking your credit score is the best way to gauge your chances of getting credit. Decoding your credit score is important in case it dips, or any errors have been made by the financial institutions resulting in your poor score. Check your CIBIL score on Finserv MARKETS for free to avail of these benefits!
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