Your finances are what your credit scores are

01-Dec-2015 written by : FSI-Team

Your credit score is a three-digit summary of your credit history, and is an integral part of your credit report. It is typically between 300 and 900, and a higher score indicates that you are likely to be more creditworthy from a lender’s perspective. Credit reports are generated by credit information companies, or credit bureaus.

This score will to a large extent determine your financial future, and can therefore be a very critical asset. It is imperative that to stay credit healthy, you manage your score well, and ensure that is always remains high or ‘good’. A poor or ‘bad’ score can negatively impact your finances.

Let us assume you want to avail of a housing loan to purchase that long-dreamt of apartment in your city of residence. With a high score, chances are that you will not only be offered the loan but that it will also be on the most competitive interest rates prevailing.

Similarly, when you apply for a credit card, the card issuing company will go through your credit report and take into account your score. If your score is good, your card application is not only likely to go through, but as in the case of a loan, you would get a better deal that someone with a lower score. In a nutshell, every time you apply for a loan or a credit card, your credit risk is evaluated basis the credit score.

Further, the usage of credit reports is not restricted to financial services as mentioned above. Your credit health can impact another very crucial aspect of your life – your employment. Prospective employers are these days pulling out credit reports as part of the hiring process, as it gives them insight into whether the candidate would be the right hire for the job or not. This is especially important for roles that require a large degree of confidentiality and trust, or those job roles that are part of the accounts or finance domains. Job roles that require routine handling of money are best undertaken by those with an impeccable credit history, as these individuals are more likely to not commit frauds or indulge in underhand dealings.

Further, mobile phone service providers also depend on credit scores to determine the credit limit to be assigned to a post-paid mobile connection user. In addition, scores are also used to finalise the deposit amount a subscriber needs to pay in order to obtain a new connection.

A credit score can not only decide whether you would be able to purchase your dream home, but also renting one depends on your credit score, as landlords are now choosing to screen prospective tenants by checking their score. This helps them understand to a large extent whether renting out their property to the concerned tenant would be risky or otherwise.

Various bureaus offer credit scores and while the scores themselves may differ the calculations on which they are based are similar. Hence, if you wish to know your credit score you can request for a copy of your credit report from any or all of the four bureaus licensed to operate in India, namely CIBIL, Equifax, Experian and CRIF High Mark.

Remember, with the increasing acceptance and usage of credit scores, your finances may be dependent upon it to a large extent. Hence, it becomes important to remain credit healthy in order to avail of financial services.

If you think your score is not at par, consider signing up for credit counselling with a credit health management company. In tandem with them, you can work towards building your score and over a period of time, even enhancing it.



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