It is believed that one should monitor their credit score regularly. It is recommended to check the CIBIL score at least once a year for a number of reasons.
For instance, what if the CIBIL score does not reflect your real creditworthiness because of some inadvertent mistakes in it.
Or if you have a plan to raise a huge loan next year, being aware of your credit score will put you in a strong position to negotiate a better deal with your lender.
Checking your CIBIL score often offers 5 benefits:
Early detection of errors: Checking your credit score enables you to quickly identify any errors or inaccuracies in your credit report. These errors could include incorrect personal information, fraudulent accounts, or inaccurately reported payment history.
Addressing these errors promptly can prevent them from negatively impacting your creditworthiness.
Identity theft protection: Monitoring your credit score can help you detect signs of illegal activity that could show identity theft. If you happen to notice unfamiliar accounts or suspicious inquiries on your CIBIL report, you can take prompt action to resolve potential identity theft issues.
Maintaining financial health: Your credit score shows your financial health and creditworthiness. Regularly checking your credit score prepares you to track changes over time and identify areas for improvement. By knowing factors that affect your credit score, such as payment history, and credit inquiries, you can take informed decisions to maintain or improve your financial standing.
Negotiating better terms: If you’re planning to apply for a loan or negotiate terms with lenders, having knowledge of your credit score keeps you in a stronger position. A good credit score may prepare you to qualify for lower rates of interest, higher credit limits, or more favourable loan terms.
Regularly checking your credit score enables you to track your progress and potentially negotiate better terms with lenders.
ALSO READ: CIBIL: 6 common misconceptions about credit scores you should be aware of
Financial goal setting: Checking your credit score can be part of your broader financial goal-setting strategy. By setting targets for your credit score and regularly tracking your progress, you can stay motivated to maintain healthy financial habits and achieve your financial goals, such as improving your credit score to qualify for a mortgage or obtaining a lower interest rate on a loan.
Frequently Asked Questions:
How does checking your credit score regularly help take major financial decisions?
Prior to applying for a loan or credit card, it’s vital to know your credit score. So, by monitoring your credit score regularly, you can assess your eligibility for credit products and understand the terms and interest rates you’re likely to receive.
This information enables you to plan ahead and take steps to improve your credit score if necessary before applying for credit.
What is the key disadvantage of a low credit score?
Among several disadvantages, one of the key disadvantages is that you are likely to be offered higher interest rates even when a loan is approved.
Do banks take the decision of giving a loan on the basis of borrower’s credit score?
Yes, lenders generally use credit score as a key factor in determining whether to approve a loan application. A low credit score may result in denial of credit or approval with less favourable terms.
Can the credit score determine a borrower’s chances of renting a flat?
It could be hard to find a flat in big residential complex which sticks to the pre-defined criteria of shortlisting tenants on the basis of their credit score. Small landlords and housing complex, however, don’t bother to check the CIBIL score.
What is the impact of low credit utilisation ratio?
A low credit utilisation ratio shows responsible credit management and may impact your credit score positively. It’s recommended to keep the credit utilisation ratio below 30 percent.
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Published: 28 Mar 2024, 11:56 AM IST
