6 strong reasons you should monitor your credit score often

If you have recently started using a credit card or taken a personal loan, it is important to first check your credit score. For those unfamiliar, a credit score is simply a three digit number ranging from 300 to 900 that reflects your creditworthiness.

The higher your credit score, the more financially credible you appear to lenders. A lower score on the other hand may suggest high credit utilisation rate, late payments, or past defaults. These are some factors that negatively impact your credit report.

Experts recommend checking your credit score regularly, at least once a year. This is crucial as it will help you in monitoring key credit score factors such as repayment history, credit mix, and the impact of hard inquiries. Keeping track of your score can help you spot errors early, improve your financial profile, and make smarter borrowing decisions.

Top benefits of checking your credit score regularly

I. Enables you to improve your score: By finding out what is affecting your credit score (high credit usage, late payments), you can take specific steps to improve it. This can be done after proper discussion with a certified financial advisor, it will help you in making your overall borrowing profile better.

II. Awareness of financial health: It gives you a fair idea of your creditworthiness, helping you understand how banks view you. A high credit score of over 750 means that you are a fairly trustworthy borrower in the books of lending institutions, whereas a low credit score means that there is a lot of work that needs to be done to bring your lending profile in order.

III. Helps detect fraud early: If your credit score suddenly falls or there is unfamiliar activity, it could show identity theft or errors on your credit report. In all such cases you should promptly reach out to your respective credit bureau such as CIBIL, CRIF High Mark, Equifax among others to get the issue resolved and bring your credit profile back in order.

IV. Better loan terms: Finding out your credit score enables you to apply strategically for personal loans and credit cards, thus avoiding hard inquiries that can hurt your credit score and raising your chances of approval with favourable rates. 

V. Big purchases: If you are planning to buy an expensive item, say a car, then checking your credit score in advance gives you time to strengthen it before applying for a car loan. A respected credit score in this scenario can result in you securing a lucrative car loan offer from lending institutions. 

VI. Does not affect your credit score: A number of platforms offer a service of free credit score. And it does not impact your credit score since checking the score leads to a soft enquiry. This is important to always keep in mind, self checks are fairly harmless. Problems only appear when new personal loans and credit cards are applied by any one individual over a very short period of time. Such behavior shows credit hunger and debt reliance. 

For all personal finance updates, visit here.

Disclaimer: Mint has a tie-up with fintechs for providing credit, you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit score. Mint does not promote or encourage taking credit as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.