Credit score is an important metric which banks and other financial institutions check before they take a decision whether to disburse a loan or not. There are a number of credit bureaus which enable users to check credit score.
When the credit score is high, banks and NBFCs are more than willing to offer loans at a concessional rate. On the contrary, when the credit score is low, banks get sceptical in giving loans. And even if they do, they tend to charge a high rate of interest.
It is recommended that borrowers check their credit score on a regular basis.
You should check your credit score at least once every three months, but ideally once a month if you are actively managing credit, applying for loans, or improving your score.
Key occasions to check:
1. Prior to applying for a new credit card, loan, or mortgage
2. After a major financial event (such as paying off debt, opening/closing accounts)
3. If you suspect fraud or identity theft
Regular monitoring helps you catch errors, prevent fraud, and optimise your credit strategy.
Key advantages of regular credit score checks
I. Better loan approvals: Banks and NBFCs use your score to decide approvals and interest rates. A superior score (above 750) can help you get lower interest rates.
II. Detect errors early: Checking the credit score helps you identify theft and unauthorised loans. Regular checks help you spot and dispute incorrect transactions.
III. Improving your credit score: If your score is low, you can take steps such as reducing credit utilisation, making timely payments, and diversifying credit types.
IV. Credit card and loan offers: Several banks offer pre-approved credit cards or personal loans based on your credit score. This can help you get the best deals.
V. Financial planning: Your credit score shows your financial discipline. Monitoring it enables people better financial planning.
You can check your score for free once a year from bureaus such as CRIF Highmark.
