Lifestyle

Stepwise Approach to Check Your Credit Score & Why It Is Important to Do So?

A credit score assists you to determine your credibility i.e., it permits the issuers and lenders to determine if you qualify for the credit card or loan. According to the credit bureaus, your credit score ranges anywhere between 300 – 900, whereas individuals with a score of 750 and above have higher chances of credit approval than the ones with a credit score of less than 750.

Remember that the rising importance of CIBIL credit score in present times amongst many lenders has made it extremely important to maintain a strong credit score. Doing this can permit you to get your loan and credit card application approved faster. A strong credit score can even assist you to get your loan approved at a lower rate of interest and charges. However, as you make the effort to improve or build your credit score, it is very important to also know how to review your credit score regularly. Having knowledge of how to review your credit score can assist you to take the right steps to ameliorate your score in case of any decrease in your credit score. Note that few digital lenders may also allow you to avail of an instant loan without CIBIL score. However, the offered loan amount is usually low due to the involvement of a high credit score. Few banks may also allow you to avail yourself of a loan at the best rate without much evaluation of your credit score. Best banks for personal loan include Axis Bank, ICICI Bank, HDFC Bank and others.

What is a good credit score?

A credit score is a 3-digit numerical representation of your financial health formed based on your credit history. The credit score ranges anywhere from 300 – 900 based on the individual’s credit behaviour. The nearer the score to 900, the more your chances of credit card or loan application approval. In simpler words, if you have a higher score of 750 or more, this means you have higher prospects to avail of loan and credit card approval. Also, most lenders consider risk-based pricing for setting the applicant’s interest rate. Those applicants with credit scores equaling 750 and above are levied a lower rate of interest than those having a lower credit score. Thus, you must aim at improving or building your credit score and those with a higher credit score must take the required steps to maintain it.

Few healthy credit habits that help in building a good credit score include on time loan and credit card dues repayment, maintaining a credit utilization ratio (CUR) of under 30 percent, not applying for numerous loans and credit cards in a short time span and regular monitoring of your guaranteed or cosigned loans. Also, you must know how to review your score through the online financial platforms or credit bureau’s website to get an idea about your credit score. Knowing your score is considered the best medium to check your credit behaviour. Reviewing your report at regular intervals also assists you to figure out any misinformation or clerical errors that might be responsible for lowering your credit score. Such discrepancies should be immediately reported to the bureaus and concerned lenders for rectification. Once rectified, your credit score will instantly go up.

How can you check your credit score?

“How can you check your credit score” is an important query asked. As all 4 credit bureaus provide free reports once every year, hence you should disseminate your request for a free credit report in a manner that you can instantly check your report every three months. You can simply fetch your credit report for free with monthly updates from financial platforms.

How is your credit score computed?

Credit bureaus compute credit scores by examining your past credit repayment history, length of credit history, credit mix and credit utilization ratio (CUR).

Major things that you must know about credit score

As credit score is given immense importance, you must ensure to maintain a good credit score. Those having a score less than 750 can ameliorate or form it by timely making their credit card and loan repayments in full, not placing in multiple credit enquiries, reviewing their report periodically, and maintaining the credit utilization ratio (CUR) of within 30 percent etc. If you don’t have a credit score, then you can simply form it by using a credit card and making timely repayments.

Holding a good credit score of 750 or more comes with various benefits like higher loan eligibility, allowance to avail lowest personal loan interest rate and processing charges by the lenders, enhances chances of credit card approval and credit limit increment, ameliorated accessibility to instant loans and different credit card offers and enhanced eligibility to go for balance transfer option.

To make the most of the above-mentioned credit score benefits, you must be aware of how to review your credit score and conduct a periodical check up to ensure it is maintained in the case of a higher credit score.  And if you detect any decrease in your credit score, ensure to maintain it.

Ending note

Lenders usually prefer to lend to those who show responsible repayment behaviour. Also, the credit bureau endows a higher weightage on your credit repayment history at the time of computing your credit score. Whenever you conduct any delay or miss your credit card bill repayments or loan EMIs, such irregularities are recorded in your report for a considerable time period. This further impacts your credit score negatively. Apart from this, it even affects your future eligibility for a loan or credit card. Thus, make sure to make repayment of your loan EMIs and credit card bills on time and in totality. Doing this will ultimately assist in ameliorating and forming your credit score, which enhances your probability of getting your loan and credit card application approved in the future. Besides these, you must even ensure to keep your credit utilization ratio under 30 percent and review your credit report periodically to figure out any errors and timely report it.

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