14-Mar-2018 written by : FSI-Team
Credit score is a very tricky attribute. One needs a lot of patience and a systematic approach to keep the score intact or in a growing phase if it is not upto that level. You need to start making timely payments of the credits which are due. So here, the credit refers to any kind of loan you have taken from banks or financial institution or any person and if they are listed with the credit bureaus. With that, it also is consists of the credit cards. So, in simple words, credit is the amount you have taken from anyone, which you are yet to repay with the mutual understanding both the parties have agreed upon.
The can be few times in life that one goofs up. But that's okay. It's a human tendency to make mistakes. If, one has missed any of the repayment of the credit which is existing, only once, then in that case even the bureaus will understand looking at the previous records. But if missing a payment becomes the habit, then one is bound to be in loan defaulter list. Once if you enter that list, it becomes very difficult for them to get out of that list. Because to get out of that list, you have to clear all the previous dues, pay the penalties they must have charged, and then start making payments periodically. In major of the cases, the reason behind the multiple missed payments is very genuine and the person has undergone major financial crunch, where he/she cannot make the payments of any of the credits they must have opted for. So to recover the crunch one had got, and make the dues + penalties + current payment on an urgent basis is definitely difficult.
At such instances, what people do is that they go for a personal loan. With this personal loan, the clear all the previous dues and then start concentrating on how to increase their credit score. As mentioned in the first line, credit improvement is a very easy process, but all you need is patience and systematic approach. Suppose, these criteria are worked upon, and one has now become a sensible and calculated payer, how will they come to know if the score has increased? Obviously, for this matter, one will check the credit report and check what is updated. But, while on the journey of improving the credit score, to measure the change and know if we are in the proper direction or not, by what frequency should one check the credit score.
With the expert suggestions, it is advised to check the credit score maximum twice a year. If in case you are in dier need of funds, or planning to take a loan on urgent basis, and you are on the path of improving your score so as you get a good deal with less percentage interest on the loan you apply for then in that case, do it atmost 3 times a year. This is also not that good option. What happens if you keep on checking your credit score again and again? According to RBI, one free credit report is to be given free to the customer once a year. Now, when you apply for a report, to check, it comes in a hard inquiry. Also, the banks or financial institution do not update the data every month. There are slabs which are decided when the banks will pass on the information they have to the bureau and then it starts evaluating. While you keep on making the inquiry for your credit score, again and again, it is hit as the hard inquiry and you are bound to drop your score in such instances.
In that case, you are losing on your money as second report onwards all the reports them would cost you. With that, you will lose the time as you make the whole process of getting the report and if the banks have not updated the things post your last generated report. And most importantly you may also drop the credit score. So all in all it's a waste of everything. In such cases do not become "penny wise pound foolish" and make a smart move.