According to a TransUnion CIBIL survey, self-monitoring Indian millennials’ credit score awareness has increased by 58% in the past few years. Millennials are among the most credit-conscious consumer categories in the country, according to the report.
They regularly monitor their credit score and have a CIBIL score of 740 on average, which is a very good score to maintain.
WHAT IS CREDIT SCORE?
The credit score which is developed on the basis of a credit report contains different financial information such as spending and income habits of the borrower, number of transactions, other borrowing information etc. This information is extracted for a period of three months in the report.
Along with applicant credit scores, these are standard reports that every financial institution uses throughout the loan approval process. During the loan registration process, the fintech lender will access these credit records to find out if an individual has a good track record and potential for loan repayment.
WHY IS CREDIT SCORE IMPORTANT?
Millennials today understand the importance of having credit cards and getting loans with easy EMIs to meet their needs without facing additional stress. However, to acquire a credit card or a loan, it is important that you have a good score.
Below we discuss the points why it is essential to understand your credit score-
1. ACCURATE PICTURE OF CREDIT VALUE
Information provided by lenders and card issuers about your loan and credit card repayments is used by the credit bureaus to calculate your credit score. This requires you to check your credit report regularly, especially before applying for any type of credit, whether it’s a loan or a credit card.
Checking your credit report ahead of time can provide you with a clearer view of your credit score, allowing you to take corrective action if necessary.
2. HELPS DETECT FRAUDULENT ACTIVITIES
Because your credit score is determined by the information in your credit report, any inaccuracies in the report, whether caused by the credit reporting agency or by you, can negatively impact your credit score. In the worst case, misinformation could also be a symptom of suspected fraud.
3. CREDIT ACCOUNT INFORMATION
Because your credit report contains information about your existing and recently closed credit accounts, any incorrect statement or inaccuracy, such as incomplete or inaccurate account data for a credit card line, or an unknown credit account listed in the report, can hurt your credit score. . Therefore, keeping a check on your credit score can help you minimize these errors.
4. CREDIT REPAYMENT
Your loan payment history, which shows how diligent and consistent you are in paying off credit card debt and EMI loans on time, is an important factor in determining your credit score.
Therefore, any inaccuracies in this part, such as incorrectly reporting missed or delayed payments when they were not, will lower your credit score. Therefore, the above points clearly indicate why it is important to have a clear view of one’s credit rating so that there is no problem in obtaining loans when needed.
(The author is Anshul Agrawal, CTO, Branch Personal Finance App)