Credit Score Simplified
If you’ve been a regular credit card user or a have a loan, you have heard and understood the term ‘credit score’ before. For those unaware, credit score, simply put, is a rating given to your creditworthiness that plays a crucial role in assessment of your loan or credit card application.
Credit score for every individual with a credit card or a loan account is maintained by credit bureaus like Experian, TransUnion CIBIL and the likes in India. You can check your credit score online to know your true financial standing in case you’re planning to apply for a loan or a credit card.
If your credit score is lower, you’re considered a risky borrower and lenders or banks may not be interested in offering you credit. While, on the other side, if you have a higher credit score (above 750), you can get loan approvals easily and with much better interest rates.
Here are some of the credit score facts that you may have overlooked but should definitely be considered to maintain a healthy credit score.
How is Credit Score Calculated?
Calculation of credit score by different credit agencies is a well-guarded secret but you should be aware of the factors which play a vital role in the calculation. If you keep these factors in check, it will lead to a healthy credit score. Top factors that constitute your credit score include:
- Credit payment history
- Credit utilization ratio (used credit limit / available credit limit)
- Length of the credit history (time since you had your first credit instrument – any type of loan or a credit card)
- Type of credit (revolving and fixed)
- Credit inquiries on your record (credit card or loan applications count as credit inquiries)
Credit Report & Credit Score is Different
While your credit score is an indispensable part of your overall credit report; both are separate terms categorically. A credit report is a more detailed account of your credit history, payments, credit accounts, credit inquiries, application history, and bankruptcy if any.
While a credit report is a summary of all the items above, a credit score is a numerical quantification based on the same factors.
Now let’s talk about the factors that affect your credit score positively and negatively.
A patchy credit payment history, loan application rejections on your record, defaulter incident, or delayed payment scenarios; if your credit report has any of these incidents, it translates into a low credit score.
While, on-time payments, less number credit inquiries, error-free credit report, and strong mix of debt accounts take up your credit score by several notches.
Checking Your Own Credit Score Won’t Affect It
As a debtor in India, you’re legally entitled to receiving a free credit report annually from any of the major credit bureaus in India – Equifax, Experian and TransUnion. Contrary to popular belief, checking your credit score doesn’t affect it.
When you check your credit score online through a free or paid service without applying for any credit instrument, it is termed as a soft inquiry and is not marked on your credit report. This type of inquiry does not affect your credit score in any way.
Moreover, there are several benefits of checking your credit score regularly – looking for errors and getting them rectified timely can ensure a good credit score. So, make sure you keep a check on your credit score periodically because a stitch in time saves nine.
Credit Score Can Save You from Identity Theft
If you’re an agile consumer and keep checking your credit score regularly, you can easily spot any incidents of fraud or identity theft by looking at the details in your credit report. For instance, if you’ve transacted on your old credit card in some time and suddenly a huge balance shows up in your credit report, you can easily pick that up for resolution to save yourself from being conned.
A Good Credit Score Can Save You a Substantial Amount of Money Over the Years
Having a great credit score (above 750), opens up many avenues for you like getting pre-qualified personal loan offers, lower interest rates on loans, and better deals. So, if you’ve been managing for a long time with an average and lesser than average credit score, you’ve ended up paying higher amounts towards interest rate on personal loans and credit cards.
Maintaining an excellent credit score saves you a lot of money over the years by saving up on interest paid towards loans, credit cards, and getting better offers than those with lower credit scores.
Credit Score is Always Individual
One of the most common credit score myths people end up believing is that their credit score can be affected by having a joint account user. If you have a joint loan account or have an authorized user on your credit card who happens to have a not-so-great credit history, it will not affect your credit score in any way. Your credit score is your individual score and if you add an applicant with low credit score to your card, it won’t bring your score down.
We hope the above facts helped you in having an in-depth understanding about credit score. Knowing the world of credit score in a better way leads to a more informed decision making while applying for personal loans and home loans.
Now that you know how a credit score works, it’s time to be in complete control by checking your credit score free online. If your credit score matches our loan criteria, we might offer you a pre-qualified personal loan. Let’s get going!
Just call us on our toll-free number at 1800-200-9898 between 9:30 am – 6:30 pm from Monday to Saturday. Alternatively, you can also write to us at email@example.com for any queries.