Have you ever thought how banks or other lending institutions determine whether or not to extend you credit? Your credit report is one of the instruments they employ. This informs them about your credit record and helps them in determining the risk of lending to you depending on your credit score. Your credit score is a three-digit figure that reflects your ability to borrow and repay money.
Your credit score is your financial footprint; it determines how trustworthy you are to banks, financial service providers, lenders, and other businesses. A higher credit score makes it easier to get a credit card, loan, or mortgage. In addition, you will save money on a variety of financial services and products. It has an impact on your life in a variety of ways, particularly if you are going to buy a home or a car, or if you are saving for the future. So, it is worth monitoring your credit score periodically for the sake of your financial health.
There are four major credit reference agencies (CRAs) in India when it comes to credit scores: CIBIL, Experian, Equifax, and CIRF High Mark. Each uses a scoring system that is slightly different from the other. But don't be put off by this because they all utilise the same criteria to determine the credit scores. So, if you have one credit score, you will have a good idea of how you are doing with the other credit bureaus.
What is Credit Monitoring?
Credit monitoring, as the name implies, involves keeping track of your credit history and keeping an eye out for any questionable activity. You could also become a victim of identity theft, which could have a negative impact on your credit score. Several credit monitoring programmes are available that allow you to examine your credit history frequently. These services also examine your credit record and notify you if any fraudulent activity or inaccuracies are found out. If you don't want to use a credit monitoring service, there are a few basic actions you may carry out to monitor your credit score on your own. Let us look at some of the methods for keeping track of your credit transactions.
1. Be Regular in Checking your Credit Card Bills
It is critical to review your credit card statement every month because you could be charged for a few charges or expenses that you had never carried out. You could potentially be a victim of fraud or identity theft. If you see any unusual activity on your credit card, contact your bank right away to try to resolve the problem. Also, keep an eye out for any unauthorised purchases made with your credit card.
2. Review your Credit Report Every Quarter
Since the beginning of 2017, the Reserve Bank of India (RBI) has made it mandatory for all four credit bureaus in the country to provide consumers with one free credit report and credit score every calendar year. This effectively means that you can obtain four free credit reports every year. Utilise this to check your credit report on a regular basis to avoid any surprises, such as fraudulent activity or unwanted credit queries. It is recommended that you flag any inaccuracies in your credit report as soon as possible, such as duplicate credit transactions or incorrect personal information to the credit bureau. You should file a dispute with the appropriate credit reference agency and fix the problem as soon as possible, as it may affect your credit score.
3. Use Soft Credit Checks
Whenever you wish to review your credit score, you can ask for a soft credit check. Soft credit checks do not have any kind of impact on your credit score. So, suppose say, you are frequently reviewing and monitoring your credit report using a soft credit check, your credit score will not be impacted. However, if you go for a hard credit check, your credit health will suffer because a few points will go down every time you opt for a hard credit check.
Before applying for any type of credit, you should check your credit report on a regular basis, at least once a year ,to ensure that you will be approved for the credit that you are applying for. Not only will you be able to detect any errors that could jeopardise your ability to get the best credit deals, but you will also be able to detect any fake credit applications filed in your name. It is better to verify all the information. You will never be penalised for reviewing your report, so do it as often as you want.