A credit score is a three-digit number which decides your creditworthiness. It is an important factor considered by your lender before sanctioning the loan. Credit score helps the lender know if you can repay your loan. So, it is very important to have a good credit score to avail loans like home loan, personal loan, auto loan and so on, from banks and financial institutions. Credit score ranges from 300-900, with 900 being the best.
While credit score is very important to avail loans, it is still mired in confusion. So, in this blog, we will discuss some unknown facts on the credit score.
See Also: Factors which Affect Your Credit Score
Your savings and investments are not considered while calculating credit score. Your credit score can be low, even if you have a large fixed deposit and have invested a huge sum in blue-chip stocks and mutual funds. This is because savings and investments have nothing to do with loan eligibility. The main factor that affects your credit score is your credit history. Information regarding loans, EMI's and credit cards (mainly repayment history) will be considered while calculating your credit score.
There is a misconception that checking credit score multiple times, impacts credit score. But, this is not true. You can check your credit score as many times as you want and it will have zero impact on your credit score. These are called soft enquiries. But, your credit score will be impacted when a bank makes an inquiry on your credit report, through any credit bureau or authorized third-party entity called hard enquiry.
You can check your credit score free, at any time on IndianMoney.com. IndianMoney.com has tied up with Experian to offer free credit score. IndianMoney.com is India’s leading financial education company which was formed to curb the misleading sales practices rampant in the financial services sector.
Many people believe that not availing a loan or credit card, leads to a good credit score, as there will be no credit history. But, this is not true. You might be surprised to know that not having credit history impacts borrowing as the credit card/loan is sanctioned on the basis of credit behavior, loan repayment history, and credit utilization limit.
See Also: A Good Credit Score Can Get You A Cheap Home Loan
Many people believe that a low credit score means loan will not be sanctioned. But, this is not always true. You can still get a loan if you have a low credit score, but on different terms like a higher interest rate vis-à-vis a person with higher credit score.
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