When was the last time you checked your credit score? A year back? Six months ago? If you don’t think that a credit score is worth checking frequently, then think again.
What is a credit score and why is it important?
Your credit score is the accumulation of all your financial activities over a period. It determines your loan eligibility, interest rate, tenure etc.
If you have never taken a loan you will not have a credit score and be considered new to credit. If you have a credit card or loan and have been paying all your dues on time, then you will have a very good credit score and in turn good credit health.
Your credit score determines your credit worthiness or in other words your eligibility for loans, credit cards etc. Having a bad credit will cost you thousands because you are considered a risk and the banks or NBFCs will offer you a high interest rate. It could also cost you your dream job as some companies also check your credit score as part of the screening process.
Lenders aside, your credit score gives you a fair understanding of where you stand with respect to credit and obtaining a credit report would be the first thing to do before applying for new credit.
An example here would serve as the right reference.
Credit Health is analogous to physical fitness and like how you train for fitness either at home or at the gym towards a goal, credit health can also be achieved with set goals and practices. Effort and discipline are common in both cases.
Why you should check your credit score regularly?
Think of checking your credit score like the timely health check which indicates your current state. In other words, a credit health check is a window to know yourself better and for banks to know how you have managed your credit. Here are some reinforcements
· Just as a person on diet monitors their diet for any discrepancies or if any changes need to be made checking your credit score allows you to keep track of all payments made monthly where you can monitor in case of any missed payments
· If you are not seeing any change in your weight you’re able to view any negative listings which with regular score check gives the opportunity to remedy the situation before applying for future credit. Rectifying any negative listing takes time as more time goes by, i.e. the older the listing the more difficult it is to rectify it. Thus, it is best to nip these listings in the bud.
· Just as you will get advice from your gym trainer which you do and monitor your weight, you can also use a credit coach whose advice and tips after execution can be tracked – This way you can see if the advice is working or not where you can make changes with your approach or change your credit coach.
· Wrong information from the creditors – in the same way a person who prepares against misinformation, checking your report frequently helps resolve disputes and correct mistakes.
· Unauthorized credit check – When someone does a hard check of your credit score without your explicit permission
Continuously monitoring your credit score and credit report gives you the advantage when you apply for a loan or in some cases even a new job.
How often should one check your credit score?
It is best to check your score at least once a year and check your credit score before applying for any credit (loans, credit card etc.) to make sure you are eligible and avoid rejections.