Your Money: Know why your credit score is important

Starting right at the top, before applying for a loan, you have to understand there are a few prerequisites that need to be given attention.

Let us assume you need a loan to fulfil something that you’ve been planning for long. Unexpected expenses throw a spanner in the works for your financial savings plan. Well, that is where financial support comes into play.

Starting right at the top, before applying for a loan, you have to understand there are a few prerequisites that need to be given attention. First and foremost, your credit score.

What is a credit score
A credit score is a numerical value between 300–850 that determines an individual’s creditworthiness. Factors such as number of open accounts, debt, credit card bills, loan and repayment history, etc., influence your credit score. Higher the credit score, better chances for you to secure a loan with a lower interest rate and enjoy many benefits.

Why check credit score?
Keeping a regular track of your credit score and credit history can prove to be beneficial. This way, you can identify your shortcomings and improve your credit score in different ways. It will also help you stay on top of any mis-reportings and rectify such errors as soon as possible.

Benefits of a good credit score
If you have a good credit score and ensure you stay within that range, you are guaranteed to enjoy some benefits. You will almost always qualify for the best (low) interest rates and you can get approved for loans and credit cards without any hassle.

Why are credit reports used?
A credit report is a detailed synopsis of how efficient you have been in paying bills and staying on top of your repayment of loans (if any). For a lender, the credit report will determine whether you are a suitable candidate or not for credit. It will also lay down the terms on which the credit line has been approved. It is important to check your credit reports regularly to ensure the information is accurate and complete.

Credit scores are numerical values such as Fair Isaac Corporation score or FICO score. These scores are 3 digit numeric representations of an individual’s creditworthiness and range from 300 to 900.

A Permanent Account Number (PAN) card is required while checking your credit score since it is an individual’s personal identification document.

Credit score inquiries can have a negative impact on your score. A phone number is needed to communicate your credit score and credit report to you. Factors such as loan history, credit card debt, consistency in repayment, open accounts and mis-reportings can affect your credit score and change it.

Source: Tax Guru