Credit score, a numerical expression of your creditworthiness, is becoming increasingly important in personal finance. Most lenders today look at it before deciding on sanctioning you any instrument of debt.
Credit score, typically ranging from 300 to 900, is calculated based on your credit history around repayment of credit card bills and loans. This helps lenders assess risks involved in lending money to you. Apart from this, credit scores can also help you get a fair understanding of your financial health. In fact, all credit bureaus in India are mandated by the RBI to generate at least one credit report annually.
Find out why you should check your credit scores regularly to maintain financial health.
Checking your credit score regularly can help you keep tabs on errors if any on part of the lenders. Even minor errors in the name or address can affect your credit score.
Serious errors, such as the presence of another person’s loan details and account details, incorrect dates of payment, non-reflection of paid dues and more, can cause grievous injury to your overall score.
If you spot any such error, you can request the credit bureau for rectification. It takes about 30 days for rectification.
Assessing repayment habits
Your credit score reflects your debt situation. Frequent checking helps you assess your credit behavior and make amends wherever required. This gives you time to monitor your repayment habits and thus improve your credit score overtime.
Opportunity to fix credit health
Soft-checking your credit score before applying for a loan would help you know whether there’s a negative account or an outstanding balance that is affecting your score. This will prevent your loan application from getting rejected. You don’t want to make a hard enquiry for a loan first up, as that would knock down your scores further.
Keeping tab on suspicious enquiries
Some enquiries regarding your score may be unauthorised. These may be attempts to access your personal information.
If you get suspicious of such enquiries, make sure to raise a dispute resolution with the credit
The writer is CEO, BankBazaar.