Have you heard or read about the concept of credit report? Are you aware of your credit score? No? Then, you are making one of the most common and biggest financial mistakes. Not being aware of your credit score means you have no idea if banks will lend you money and if they do, at what rates. And in case of a financial emergency when you need access to urgent funds, this may lead to a big crisis.
For instance, a medical emergency in the family may require you to take a personal loan. But when you apply for it, you realize no bank will lend to you because of your low credit score. If you had been aware of this earlier, you could have taken adequate steps to avoid this situation. Lack of awareness about your credit score may also lead to rejection of your home loan application, which means you may have to let go of your dream home.
What is worse, or at least equally worse, than a low credit score is having no credit score. If you haven’t taken a loan or used a credit card, means you do not have a credit history or a credit score. In this situation, when you apply for a loan, there is a high chance your application may get rejected as banks have no idea about your repayment history, and hence you would be deemed as a ‘risky’ profile.
Your credit score is basically a 3- digit number given to any individual that defines one’s credit worthiness. The scoring is based on various components like payment history, debt, length of credit history, types of credits availed and account inquires. In other words, this 3 digit number ranging from 300- 900, reflect the score of your financial history. More score means you are a trustworthy person – financially!
6 Reasons Why One Should Check Their Credit Report Today
Whether you want to take a loan or credit card or does not want to lend money at all, it is always recommended to check your credit score and report and stay updated. Here are the common yet important reasons about why one should check their credit score regularly.
1) Looking To Take A Loan
If you are planning to take any kind of loan anytime soon, then you should check your credit score immediately, even before applying anywhere. Your credit score will give you an idea about the choices you have to lend that money. Good credit score means you can easily get loan at a considerate rate of interest
2) Know Your Credit Value
Even if you don’t wish to borrow money, it is a good practice to check your credit score and know about your financial health. Even if it is bad, then you can take proper measures to improve it so that you don’t face any difficulty in any kind of financial emergency
3) Ensure That The Credit Score Is Accurate
Any error in your credit report can put your future money-lending plans in jeopardy. That is why one should keep a check on the credit score and report any discrepancies to respective credit bureaus.
4) Maintain or Improve It
Checking your credit score regularly informs you about any changes easily. This way, you can take measures to improve it (in case of low credit score i.e. less than 700) or maintain it (in case of high credit score i.e. above 700). If your credit score falls, you will understand the reason behind it and try to recover those points as soon as possible.
In case you have a low credit score, there are 4 things you can do to improve your credit score quickly:
a. Pay your EMIs on time, do not default on any repayment
b. Pay your Credit Card bills in full on time
c. Do not use more than 40% of your credit limit on your credit card
d. In case you need a loan or want to apply for a credit card, do not apply at multiple banks
e. In case you do not have a credit score, apply for a credit card from a bank where you have your savings account and start using the card, regularly but responsibly
5) Keep A Check On Co-Signed Loan Repayment
Did you know that if you have co-signed a loan with a friend, relative or spouse, then you are also liable for the debt? With credit report, you can keep a check on that loan repayment. If your credit score goes low, then missed/ late loan repayment from the loan lender might be a reason. This way, you can make arrangements with the creditor before it turns into anything worse.
6) Prevent Identify Threats
Your credit score and report shows details of all the credit cards and loans taken under your name. If you find any money lending activity in your credit report that you are not aware of then you have become a victim of financial fraud. In such case, you should at once go to national credit reporting companies. They will help you stop these credit frauds and prevent any misuse in future.
Where can you check your credit score?
You can fetch your credit report from the websites of the credit bureau. In India, credit score is issued by credit bureaus like Trans Union CIBIL, Equifax, Experian and CRIF High Mark. Earlier, these reports were chargeable. However, RBI made it compulsory for the credit bureaus to give your credit report for free once in a year.
You can also check your credit score from online financial marketplaces. Usually, they provide your credit report instantly. Along with this, aggregators like Paisabazaar also deliver free monthly updates on your report to your email. These reports are jargon free and are in an easy to understand language.
Remember if you check your credit score on your own, there is no affect on your score.