From buying a mobile phone on EMI to getting a home loan – your credit score can impact your financial future. Let us understand why it is important to check your credit score regularly.
Understanding your credit history and how it impacts your borrowing capability can help you easily sail through the rough waters of decision making. Your credit score is an indicator of your creditworthiness. Lenders, financial companies, and credit card companies check your credit score before making a decision on your application.
You can always opt for a soft inquiry, as soft credit searches do not impact your credit history. You will get a snapshot of your financial behaviour without losing any points. It’s a win-win situation. But why should you consider checking your credit score regularly, how does it matter if you are not regularly reviewing your credit history? Let’s find out.
Here are 6 reasons to check your credit score regularly:
A credit score is a 3-digit number that is calculated based on your payment history for various credit products you’ve availed throughout. There are chances that your credit report may have some errors, although not necessarily. However, if there is an error in your credit report, it will ruin your credit score. You must check your credit score from time to time to know if everything is fine on your report.
If you find any errors on the report, flag them to the Credit Bureaus and get them corrected as soon as possible to get back on track.
A good credit score will always help you get your loan or credit card application approved. Lending companies will check your credit score to see whether you can repay the loan on time or if there are any chances you’ll default. Hence, checking your credit score regularly will help you understand your financial standing. Once you know what’s on your report, you can work on it accordingly to ensure your loan application doesn’t get rejected.
Remember, the higher your credit score, the lower the rates of interest are. Having a good credit score offers a sense of reliability to the lenders/lending companies. Thus, the rates on personal loans, home loans, and auto loans will be lower if you have a good credit score. However, if you do not have a score that is good enough, lenders will offer you loans with a high interest rate. That is because of the chances of defaulting. The same goes for credit cards. Your credit score will be a deciding factor for the credit limit you will be assigned.
Checking your credit score regularly can help you understand whether the current loan or credit card deal that you have is the best one or whether you should look for other options that can save you money.
There are employers who check your credit score before making a decision on your hiring. A healthy credit score may work in your favour. Potential employers will seek your consent before reviewing your credit report. A good credit score will show that you are efficiently managing your finances, which may, in turn, increase your chances of getting hired.
Most of us often think that we are paying off our credit card debts on time and hence, there is absolutely no need to check our credit score regularly. However, only making timely repayments is not the sole factor contributing towards your credit score. You should have a low credit utilization ratio as well. Having a credit utilization ratio of equal to or less than 30% can help you boost your credit score. Keep an eye on your credit score and take proactive measures to maintain a good score.
Your credit report is the key to a stable financial future. Assess your credit report to understand how your credit score is being calculated and what steps you need to take to make it shine through. Checking your credit score regularly will help you understand the factors that are impacting it. And once you identify the factors, you can work on them to boost your credit score.
Your credit score is a key piece of information that reflects your creditworthiness. Checking your credit score regularly helps you understand your financial well-being. This is the first step towards improving your financial health and achieving your life goals.