Credit Check. Add this to your to-do List

A credit score is an important measure that lenders such as banks and non-banking finance companies consider before approving your loan or credit card application. Getting credit from lenders comes in handy as it increases your financial independence and brings you closer to your dreams of buying a car or a house. Therefore, it is important to maintain a high credit score.

What is a credit score?

A credit score is a measure of your creditworthiness. It is a 3 digit number between 300-900 that offers summary of your credit report and measures credit risk based on your credit history and repayment behaviour. Your credit score are calculated by credit bureaus in the country that are regulated by the Reserve Bank of India (RBI). Currently there are a total of four credit bureaus in India viz; TransUnion (CIBIL), Equifax, Experian Credit Information Company and High Mark Credit Information Services.

Importance of checking your credit score regularly

• Know your credit status: It is important to check your credit score and credit report from time-to-time as it gives you a fair understanding about the current status of your credit score. After checking your credit report, you can know where you are going wrong and rectify that error which could be tweaking your spending habits. As per the mandate from the RBI, individuals are entitled for one free credit report in one calendar year. Moreover, you can check your credit score from several fintech companies.
• Possible errors in your credit report: There can be errors in your credit report which could be the one of the reasons for a low credit score. You may come across instances where a credit bureau has entered incorrect data in your credit report that could have brought your score down. For example, your credit report could show that you have paid off your loan, which you have already paid off. Such errors have a negative impact on your credit score. Check here to know on Credit Score
• Avoid hard credit checks: If you apply for a loan or credit, you trigger an enquiry from lenders and the first thing they will do is check your credit score. Such enquiries made by lenders are called as hard enquiries and they bring down your credit score. Therefore, it is advised that you should know your credit score before applying for a credit card or a loan.
• Identity thefts are common: Another reason to check your credit score regularly is to see whether you have not fallen prey to an identity theft. For those unaware, an identity theft means that someone else is banking on your credit report. The sooner you are able to spot a case of an identity theft, the more likely you are to prevent extensive damage. Such misuse of your credit can have a bad effect on your credit score.

All the aforementioned reasons should be taken into consideration in order to maintain a good credit score as if there is any issue, you can resolve it at the earliest