At CreditEnable, we get this question a lot. Most people don’t understand the great impact their credit score has on their creditworthiness, i.e., their ability to get a loan. So, we answered it.
What does your credit score mean for you?
Your credit score says a lot about you, including your track record with credit, your financial stability and trustworthiness when it comes to finances.
The closer your score is to 900, the better is your credit score. An Experian credit score of 750 is considered ideal for getting a loan on favourable terms. If your credit score is less than ideal, you need to make changes to improve it.
What can a good credit score get you?
Since your credit score indicates to lenders your financial stability and trustworthiness, a higher credit score can get you easy and faster loans, better credit card deals, and lower interest rates!
Conversely, a bad or low credit score reflects your faulty credit behaviour and reduces your future credit options. This is why it is important to know where you stand when it comes to credit.
Why should you check your credit score regularly?
Know where you stand:
Your credit score is an important part of your overall financial health. Ignoring it would be just as detrimental as ignoring any part of your physical health. Whether it’s good or bad, it’s better to know your credit score than to have no idea where your credit stands. The good news is that even if your score is bad, you can take steps to improve it. Meanwhile, if your credit score is good, you can focus on maintaining it.
Keep your credit in good shape:
Your credit score is not something that can be built overnight. If you’re applying for a loan next week, you can’t get your credit score ready in just a few days. Instead, it takes years to build up a good credit history. Monitoring your credit score puts you in control of your credit and makes you more accountable for keeping your credit score at its best.
Make sure your credit information is accurate:
Your credit score is a reflection of the information in your credit report. Checking your credit score can give you an indication as to whether your credit report is accurate. If your credit score is lower than you expect, it could be a sign that your credit report may contain errors that need to be disputed with the credit bureaus to be corrected. You can dispute errors in your CIBIL and your Experian credit reports.
Be confident of your loan application:
Knowing where your credit stands prepares you for the possible outcomes – even the less desirable ones.
Gain insight into what actions hurt and help your credit score:
As you monitor your score, you can tell how your financial actions affect your credit. For example, you can see how paying off a balance or opening a new credit card will affect your credit. Once you know how these actions affect your credit score, you’ll know what to avoid in advance of a major loan application.
Respond to changes quickly:
Checking your score regularly informs you of changes to your credit score much sooner. If your score falls, you can use the information in your report to figure out what might have caused the change. Then, you can take steps to recover the credit points you lost.
You now have a deeper insight into why your credit score is important and why you should monitor it regularly. As a business owner, your personal score also impacts your business credit report and your ability to get a business loan. Wondering what information is in your business credit report? You can learn more about that here. Keeping these things in mind will help you plan your finances and adjust your financial actions to increase your creditworthiness before applying for a personal or business loan.