It is a common habit to disregard checking your credit score at least twice a year, especially when you are making repayments on time. However the ten reasons mentioned below will tell you why you should check your credit score.
1. To prevent your identity being stolen
Identity theft is today’s reality in India. More and more number of attacks are being launched by hackers daily who are trying to steal the valuable information of a person such as his or her netbanking details. In most of these situations, the victim comes to know of the crime way too late. Checking your credit score and report will not only give you an idea of the obvious details but will also alert you about possible unfamiliar transactions which could lead to discovery of fraud and identity theft.
2. To spot erroneous data in credit report
It is possible that the credit bureau might have entered a piece of incorrect data in your credit report which has weighed the credit score down. Until and unless the credit report is thoroughly examined, spotting an error is impossible. For instance, you had taken a loan a while back for which you have made all the repayments on time but the credit report is showing the loan as still open. This erroneous information provided by the credit bureau in the credit report will impact your score negatively.
3. To identify steps to be taken to improve your credit score
For people who have a poor credit score, it is essential to check the credit score to identify steps to be taken to reverse the situation. Identifying these steps and acting on it will definitely help the chances of the credit score reaching closer to the 750 mark (A score of 750 and above is considered a good credit score).
4. Preventing hard enquiries on your credit score
If you apply for a loan or credit without actually knowing your credit score, it could negatively impact it. For instance, if a person has a poor credit score and applies for a home loan which is rejected by the lender, the credit score will go even further down because of the hard enquiry made by the lender on the credit score. For example, repayment for a previous loan was not made on time is negatively affecting your credit score, in future you can ensure that all the periodic repayments are made on time.
5. Obtaining lower interest rates on loans
If you check your credit score and to your pleasant surprise find that it is healthy, you can apply for a loan and negotiate for a lower interest rate to be paid on the loan than usual by leveraging your credit score. This could be very beneficial as it could save you thousands or even lakhs of rupees if the term period for the loan taken is long.
6. You can check your credit score once a year free of charge
The Reserve Bank of India (RBI) has made it mandatory for credit bureaus to provide the service of providing the credit score in addition to the detailed credit report once a year without levying any charges. When it is free of charge, all you need to do is to go to an online website that lets you check your credit score. Knowing you credit score is now two clicks away.
7. Credit score verification in job applications
Organisations across the globe have now started checking the credit score of the applicant. It is now seen as an important measure of financial security of a person. A score of less than 750 could hamper the chances of the selection of the applicant. Therefore, checking your credit score and keeping it healthy is essential.
8. A measure of financial security of a person
In a situation when a person might require a substantial sum of money, a good credit score will go a long way in ensuring that the person gets the approval for the loan or credit for the same whereas a person with a much poorer credit score might be rejected from getting an approval for the same. Having a good credit score is a measure of the financial security of the person and allows him to borrow money in emergency situations.
9. Obtaining an affordable insurance premium
Everybody has to take insurance once or more in his or her life and if you have a good credit score, now you will be able to get insurance which has an affordable premium as insurance companies are offering attractive premiums if you the credit score is above 750.
10. If you are a loan guarantor
If you are a loan guarantor, it is essential for you to know what your credit score is. Since you are a loan guarantor for another person any delay or default in making the payment on time will negatively impact your credit score in addition to the borrower. So choose the person for whom you are becoming a loan guarantor very carefully.
Overall, the ten reasons mentioned above should be enough to make you check your credit score twice a year. Do not underestimate importance of having a good credit history and a healthy credit score which cannot be mentioned enough (sigh)!!