If you’ve ever applied for a loan or a credit card, you would know that banks and other financial institutions ask you for your credit score. The credit score, also known as the CIBIL score, is a very important factor when it comes to determining an individual’s eligibility for a credit facility. The CIBIL score range starts from 300 and goes all the way up to 900. Here, 300 is the lowest credit score that an individual can have and 900 is the highest. Generally, financial institutions require a credit score of at least 750 or more in order to be eligible for a loan.
If you’re wondering how to check credit score, you’ll be glad to know that there are multiple service providers who offer the service for free. And considering the importance of the credit score, here’s why millennials such as yourselves need to check your credit report regularly each month.
Why should you check your credit report regularly?
Wondering why you should check your credit report each month? Here are some key reasons why you should do it.
1. To determine your creditworthiness
Although every individual should make it a habit to check their credit report each month, it is the millennials who need to do it diligently and without fail. The reason for this is that millennials and younger generations tend to embrace credit cards and loans, both of which can impact their credit worthiness. By checking their credit reports each month, they can constantly stay on top with respect to their creditworthiness.
2. To detect errors and mistakes quickly
Although the credit reporting and monitoring system in India is robust and less prone to errors or mistakes, there might still be a few that might escape the stringent system. For instance, there could be a mistake in the details of your credit facilities, omissions in the credit repayment details, mismatch of personal information, or unauthorised credit score enquiries.
In any of the above cases, your CIBIL score range is what would get affected first, which can ultimately lead to rejections when you apply for a loan or credit facility. Here’s where constant monitoring of your credit report can help you out. Now, when you witness an error or a mistake on your credit report, you can immediately bring it to the notice of the concerned authorities and get them rectified as soon as possible. However, that would be possible only if you checked your credit report each month diligently.
3. To keep an eye on various other aspects of credit scores
This is another major advantage that you get to enjoy by checking your credit report regularly each month. There are certain factors that go into the determination of your credit score like the Credit Utilization Ratio (CUR) and credit mix. These are crucial information that credit bureaus use to determine your CIBIL score range.
The CUR basically tells you just how much of the credit limit you’ve utilized up until a point in time. For instance, if your total credit limit is Rs. 10 lakhs, including both credit cards and loans, and you’ve utilized Rs. 5 lakhs, your credit utilization ratio would be 50%. The higher the credit utilization ratio, the lower your credit score is likely to be.
And similarly, the credit mix tells you the kind of loans that you’ve been opting for. Ideally, your credit mix should consist of both unsecured and secured forms of credit in a reasonable proportion. Having too many unsecured forms of credit can drastically bring down your credit score.
By checking your credit report each month, you can consistently keep an eye on these aspects and ensure that it stays within the recommended limits.
Now that you know the importance of checking your credit report each month, go ahead and get yours right away. If you’re still wondering how to check your credit score, you can simply visit the website of any one of the 4 credit bureaus in India – Experian, Crif Highmark, CIBIL, and Equifax and avail a free credit report. Alternatively, you can also visit the website of your favorite online financial portal to know what your CIBIL score range is.
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