Have you ever checked your credit score or your credit report? If not, then undoubtedly, you are losing out on a lot of opportunities, savings, and advantages.
And, if you have checked your credit score, then how often do you keep a check on that?
The majority of us do this once in a while, but it is essential to understand that a regular credit check is as important as a regular health checkup because the only way of doing a financial health checkup is through a credit check.
And, to keep a check on your financial well-being, you need a credit report, which is like your financial fingerprints, revealing how you have used and managed credit over time.
It reflects how good you are at managing your expenses and debts and whether you have paid your bills and debts in the past or not.
From loans and credit cards to mortgages and insurance, and even jobs, your credit score can determine whether you qualify for them all or not and, if you do, then how much interest you would pay.
However, do you know how you can keep a check on your credit score, and if yes, what does your score signify?
If you don’t know all this, then don’t worry; we have got you covered. Through this blog, we will dive deep into knowing how to do a credit check and why it can make a big difference to your financial health and goals.
What is a Credit Check?
Maurice Switzer once said,
“Credit is like a looking glass, which, when once sullied by a breath, may be wiped clear again, but if once cracked, can never be repaired.”
This quote beautifully highlights the importance of maintaining a good credit history and avoiding any cracks that could damage your credit score and financial health.
And to keep a check on your creditworthiness, lenders and other entities perform a credit check, which is a process of accessing your credit report and score from one or more of the three major credit bureaus in India: CIBIL (Credit Information Bureau (India) Limited), Equifax, and Experian.
These credit bureaus collect and compile information about your credit activity from various sources, such as lenders, banks, and other financial institutions. And, further use this information to create a credit report that summarises how you have used and repaid credit over time, such as:
- How much debt do you have, and what types of credit do you use
- How often do you make payments, and whether you pay on time or late
- How long have you had credit accounts, and how often do you use them
- How much of your available credit do you utilise
- Whether you have any negative items on your report, such as defaults, collections, bankruptcies, etc.
Then based on your credit report, the bureaus assign you a credit score that ranges from 300 to 900. The higher your score, the better your credit profile, as a good credit score indicates that you are a responsible borrower who can manage debt well and poses a low risk to lenders.
How To Do A Credit Check?
There are primarily two ways of doing a credit check:
1. By requesting a free annual credit report from each bureau,
2. By using a paid service that provides more frequent access and monitoring.
1. Free Annual Credit Report
By law, everyone is entitled to one free credit report from each of the three bureaus annually, and to get your free credit report, here are the websites from where you can request it:
1. CIBIL’s official website.
2. Equifax’s official website.
3. Experian’s official website.
To get your free report, you will need to provide some personal information, such as your name, date of birth, PAN number, address, etc. Additionally, you may also need to answer some security questions to verify your identity. Once you submit your request, you will receive an email with a link to download your report.
You can also request your free report by mail or phone. However, this may take longer and require more documentation.
2. Other Credit Check Service
If you want more frequent access to your credit report and score, or if you want to monitor any changes or alerts on your credit profile, you can use other platforms that offer these features. There are many online platforms that provide you with your credit reports and credit scores at your fingertips. Some examples are:
1. Finology Select: Here, by filing a simple form in just two minutes, you can check your CIBIL score and even download your credit report. Along with this, you also get a chance to get Ready Loan offers powered by Bajaj Finserv.
2. Paisabazaar: This is another popular platform that lets you check your credit score from all three bureaus for free. You can also get customised suggestions and deals on various financial products based on your score.
3. BankBazaar: This is a similar platform that allows you to check your credit score from all three bureaus for free. You can also compare and apply for loans, credit cards, insurance, and other products based on your eligibility.
Why Should I Do A Credit Check?
Now that you know how to do a credit check, you might be wondering why you should bother doing it in the first place. After all, who cares about some numbers and letters on a piece of paper?
Well, actually, a lot of people do. And they should matter to you too. Here are some reasons why:
- To get better deals on loans and credit cards: Your credit report and score are the prime factors that lenders check to decide whether to approve your loan or credit card application and what interest rate and terms to offer you.
A good credit score can help you get lower interest rates, higher loan amounts, more extended repayment periods, and more flexible options, whereas a bad credit score can make it more complicated or more expensive to get credit or even result in rejection.
- To save money on interest and fees: By getting better deals on loans and credit cards, you can save a lot of money on interest and fees over time.
For example, if you have a credit score of 750 and get a personal loan of ₹5 lakhs for three years at 12% interest, you will pay ₹1.66 lakhs in interest. But if you have a credit score of 650 and get the same loan at 18% interest, you will pay ₹2.43 lakhs in interest. That’s a difference of ₹77,000!
This is because, ideally, your credit score should be 750 or above.
- To avoid identity theft and fraud: By checking your credit report regularly, you can spot any errors or discrepancies that might indicate identity theft or fraud.
For example, if you see an account that you don’t recognise, a balance that you don’t owe, an inquiry that you didn’t authorise, or a transaction that you have not done, then you can report it to the bureau and the lender and take steps to protect your identity and credit.
- To improve your financial habits and goals: By doing a credit check, you can also get a crystal clear picture of your financial situation and behaviour.
You can see where you stand, what areas you need to improve, and what actions you need to take to achieve your financial goals. You can also track your progress and celebrate your achievements as you improve your credit health.
Regularly checking your credit score and report is extremely essential for maintaining a healthy financial profile. There are various ways you can keep a credit check, and after going through the ways we just taught you, you must agree with us that it is not at all a complicated or tedious task; just follow the simple steps we have suggested to you and make sure you stand strong and healthy in every financial aspect.
So what are you waiting for? Do a credit check today and see where you stand.