Facts of Credit Score
A credit score is a numerical expression or a three digit number based on person’s credit report and information fetched by credit bureaus. It is the reflection of one’s credit history. It represents a person’s credit worthiness for availing the loans. A good credit score is 750+ is essential if you want to buy a house, finance a car, get a credit card and rent an apartment. Credit bureaus such as CIBIL, Experian and Equifax only focus on the relevant information related to your credit history or EMIs on your loans such as a Home Loan or a Car Loan.
Other organisations such as mobile phone companies, insurance companies, landlords, and government departments use the same techniques. Digital finance companies such as online lenders also use alternative data sources to calculate the creditworthiness of borrowers. There are various fascinating facts which you should keep in mind when you think of credit score.
1. Investments and Savings Do Not Affect the Credit Score
In order to boost your credit score you have been investing money in top performing mutual funds. Nonetheless, your credit score remain the same because credit score isn’t affected by savings and investments. In order to increase the credit score you can pay bills on time and reduce the amount of debt you owe. You can also check your credit report for errors.
2. Multiple Soft Inquiries of Credit Score is Not Harmful
A soft inquiry is a direct inquiry of the credit score from any credit bureau. You are free to make multiple soft inquiries of your credit score. Only hard inquiries hurt your credit score. Hard inquiry is usually done when someone applies for a new credit from a bank or NBFC.
3. Credit Bureaus Do Not Edit Your Credit Information Directly
A credit bureau is a data collection agency who gathers account information from various banks, NBFCs and Credit Unions. It provides the fetched information to a consumer reporting agency. It is true that Credit bureaus generate and update your credit report through the grabbed information. However, credit bureaus do not hold the power to edit or delete someone’s credit history or information. They cannot directly edit the information of your credit score.
4. A Good Credit Score
What is a good credit score? A credit score of 700 or above is generally considered good. A score of 800 or above on the same range is considered to be excellent. Most credit scores fall between 600 and 750. Higher scores reflects better credit decisions taken by you and can make lenders confident that you will repay your future debts as agreed. Every person needs to require at least 750 score to avail any kind of loan. However, there is no clear number which decides your fate of getting loan. The cutoff point for “good” credit depends on what you’re trying to buy, and who you ask. As different banks have their own requirements and policies.
5. Irrelevant Factors
The factors which are not included while checking the credit score are an individual’s race, religion, color, sex, age, salary, profession, title, employment history and marital status. Your bill payment history, your credit history age, number of credit inquiries, types of credit on your report and your level of debt matter in your credit score. Moreover, earlier an individual had to talk with the lender or banker when the credit scores did not exist. It was a quite subjective process because if the lender didn’t like you or think you were not trustworthy, you weren’t going to be approved.
6. Credit Score Still Exists Even If Have Not Checked by You
There’s just one simple rule to your Credit Score. If you’ve got a credit history, then you’ve got a Credit Score. So, irrespective of the fact that whether you have checked your Credit Score or not your Credit Score will exist if you have ever borrowed money from a bank or have had a Credit Card. Banks and other NBFCs send in a monthly report of their borrowers credit transaction history to credit bureaus.
Therefore, these are some of the facts which you need to keep in mind whenever you think of your credit score.