Credit score is a 3-digit numeric summary of the information found in your credit report (credit history). Your score may be calculated by any of the 4 officially recognised credit information companies in India – TransUnion CIBIL, Equifax, CRIF Highmark and Experian. Credit scores can range from 300 to 900 and a score closer to 900 is usually considered to be a good score. A good credit score can provide you various benefits such as easier availability of additional credit and better terms such as lower interest rates, higher loan amount/credit limit, etc. However, there are various other key reasons why you should regularly review and monitor your credit score. Some of these are discussed below:
- Ensure Accuracy of Information: Checking your credit report and score regularly is essential to ensure that the information displayed in the report is accurate. Sometimes a low credit score can be a result of an error/ inaccuracy of information. This needs to be reported and corrected using the appropriate method such as the CIBIL dispute resolution mechanism. Regularly monitoring your credit score and report also saves you from becoming a victim of identity theft as you are constantly aware in case any unauthorized transactions or unknown accounts are added to your name.
- Know Your Financial Standing: It is important to keep tabs on your credit score to monitor your financial status. If you have a good credit score, it is essential that you continue to follow good financial practices such as paying your EMIs and credit card bills on time to further build or maintain your credit score. In case your credit score is low, you should know about the factors that lead to a lower credit score and take remedial measures to improve it.
- Know the Effect of Your Actions on Your Credit Score: When you regularly monitor your credit score, you can figure out how your financial actions affect your credit score. For instance, over a period of time you will know how paying off a debt or availing a new credit card can affect your credit score. Once you know the effect of your actions, you will know what all you can do and what you should avoid to build and maintain a healthy credit profile and a good credit score.
- Faster Response to Changes: You can also know the changes to your credit score much sooner if you check your credit score regularly. In case your credit score falls, you can look at the information in your credit report to find out the reasons that might have caused the changes and take steps to rectify the same.
- Know When You Can Avail Better Credit Card and Loan Offers: Checking your credit score regularly also makes you better aware about when you are more likely to easily access an additional loan or credit card or if you can negotiate better terms of credit on an existing or a new loan/ credit card. A high credit score increases your credit-worthiness and lets you access additional credit on better terms such as lower personal loan interest rates, gives you more negotiating power, etc.
- Maintain a Healthy Credit Profile: It is also essential to regularly check your credit score to maintain a healthy credit profile and a clean credit history. Since credit score is a numerical summary of the information found in your credit report, a good score usually validates your credit behaviour, whereas, a low credit score score tells you that you need to rectify actions and handle credit more responsibly.
Q1. Can checking one’s credit score lead to a fall in the credit score?
No. Checking one’s own credit score is a soft inquiry and does not affect your credit score. Only hard inquiries for your report when made by prospective when you apply for new credit impacts your credit score.
Q2. How frequently should I check my credit score?
It is completely up to you. However, a monthly review should be sufficient enough to keep you informed about any changes that might creep into your credit report and affect your credit score. You can check your credit score for free with monthly updates on Paisabazaar.com.
Q3. What are the key components of a credit report?
The key components that make up a credit report are:
- Personal information
- Contact information
- Employment information
- Account information
- Enquiry information
Q4. How can I check my credit score?
You can apply for your credit report and credit score by visiting the website of any of the four credit information companies in India- TransUnion CIBIL, Equifax, Experian or CRIF Highmark. You can avail one free credit report from each of the credit bureaus every calendar year. You can also avail your credit report and credit score completely free of cost through the Paisabazaar website.