Maintaining a healthy credit score is pivotal when it comes to securing loans or credit cards from banks and NBFCs (Non-Banking Financial Companies).
These financial institutions evaluate your creditworthiness by examining various aspects, including your credit history, defaults, late payments, as well as information about your credit cards, loans, and bank accounts.
The data they gather helps them determine whether to approve your loan application and, if approved, the interest rate and loan amount you qualify for.
In light of these considerations, regularly checking your credit score becomes essential to ensure your financial well-being.
Failure to do so could lead to severe consequences, such as loan rejections and credit card application denials, due to incorrect information on your credit report.
To safeguard your financial interests, it’s crucial to be aware of key factors that can impact your credit score.
One common issue to address is inaccuracies in your credit report. It is vital to monitor your sanctioned or disbursed loans and diligently keep track of your payment history.
Mistakes in these records can result in significant losses, such as being labeled as a defaulter despite making timely payments.
Such errors often occur due to incorrect entries, making it imperative to take immediate action to rectify them.
If you do encounter an error, promptly inform the credit bureau responsible for your credit report. Additionally, closely scrutinize the credit inquiries listed in your report.
Unrecognized inquiries may indicate attempted identity theft, warranting immediate reporting to the credit bureaus to safeguard your financial identity.
Another crucial aspect to consider is your credit utilization ratio. This ratio reflects the proportion of credit available to you versus the portion you utilize.
Experts advise against fully exhausting your credit limit, as continuously exceeding it can adversely impact your credit score.
Remember, your credit report encompasses up to seven years of your credit history, including loan EMIs and credit card bill payments.
Lending institutions regularly share consumer credit information with credit bureaus, leading to updates in your credit score.
By proactively monitoring your credit score and being mindful of your credit utilization, you can maintain a strong financial position and make informed decisions about your borrowing capabilities.
Empower yourself by staying vigilant and informed about your credit score. Regular checks will not only help you rectify any errors but also enable you to take proactive steps to improve your financial health.
