Alert! Bad credit score can get your loan application rejected - Know how to monitor it, stay credit healthy
At some point in our lives, we need financial funding for various reasons. It is important to maintain a good credit score to make things easy in these situations. This one indicator plays a major role in what happens to a loan request. The credit score helps determine two things. Firstly, since lending money comes with a list of risks, credit score helps lenders understand how reliable the customer is when comes to repayment of debt. Secondly, the credit ratings also help to determine the type of loan that is suitable for the person.
Credit Score is a numerical representation of your past credit behavior which is shown as a number between 300 through 900. The nearer you are to 900, the better. A good credit score exhibits a high level of your creditworthiness to the lenders. A credit score can no longer be considered as an optional requirement to get you credit. It is very much essential for you to get any kind of credit, be it long-term or short-term.
According to Ranjit Punja, CEO and Co-Founder of CreditMantri, customers with good credit scores have been getting better deals on loans and credit cards of late i.e. people with credit score above 750, majority banks offer loans at lower interest rates than for people with credit score between 650 and 749.
Punja also explained that there are employers in certain sectors like banking, insurance, telecom, regulatory authorities such as SEBI and IRDAI, who give consideration to the credit scores while deciding an individual's candidature. The trend is said to be moving across to other sectors too.
In India, credit scores are issued by 4 credit bureaus namely Equifax, CIBILTM, Experian and CRIF High Mark.
Due to the importance it assumes, there is a lot of awareness on credit scores these days. But, just being aware of the term credit score and the importance it assumes isn't enough. To have a good credit score you need to keep a track of your score and monitor it on a regular basis.
Punja explains, continuous monitoring of credit scores not only helps you maintain good scores, but also helps you rectify errors (if any) and negotiate a better deal for your credit requirements.
How Can You Monitor Your Credit Scores?
There are two ways for you to monitor your credit scores, as per CreditMantri.
1.Monitor scores with the Credit Bureaus
As we know, credit scores are offered by the credit bureaus.
One way of monitoring the credit scores is by checking your scores directly with the credit bureau.
The Reserve Bank of India (RBI) has mandated that every individual must be able to access his/her credit score and the associated credit report free of charge at least once a year. So, you can register yourself with any of the credit bureaus (on their websites or on apps) and check your credit score free of charge.
However, if you would like to constantly monitor your score, checking it once a year may not be sufficient. To help you monitor scores on a regular basis, you could take a paid subscription with the credit bureaus.
These subscriptions run for a pre-determined period like 1 months/6months/1 year, etc., where you get unlimited access to your credit scores. In addition, you are also eligible for credit monitoring and dispute resolution services.
At the same time, it is important that you check scores with the same bureau each time, as different credit bureaus employ distinctive methodologies to evaluate your credit score. Checking scores with different bureaus each time may not give you a correct picture of credit score.
2. Monitor Scores With Fintech Companies
What if you are looking to avail credit in the near future and want to improve your credit score, for which you would need to monitor it regularly? To make your credit score more accessible to you, many fintech companies have tie-ups with the credit bureaus.
You could make use of their services to monitor and improve your credit score. You could check your score as often as you please free of cost at some of the fintech websites. Moreover, checking scores on the websites of fintech companies are considered as soft inquiries and do not affect your credit scores like in the case of hard inquiries.
These sites also have offers for loans and credit cards for various ranges of credit scores which you can choose from.
Thereby, monitoring your credit score is one of the cornerstones of being credit healthy, make sure you are in control of your score by monitoring it not less than once in 3-6 months.