Your Credit score is a three-digit rating that is attributed to you by the prestigious credit bureaus in the country like CIBIL, CIRF High Mark, Equifax, and Experian. This score is based on how well you have managed your credit accounts by making timely payments, keeping a balanced mix of credits, and not making new credit applications.
In this regard, you may come across several myths that lead to a dilemma at times. In this post, we will explore the top myths and several other factors that will help you make informed decisions.
Read on!
Differences Between Hard Inquiries and Soft Inquiries
A slight influence on your credit score depends on who checks your credit rating. Let us look at the difference between hard inquiries and soft inquiries:
Hard Enquiries
If a financial institution or a formal financial organization checks your credit score, it may depict some kind of credit risk. This is a hard inquiry and can bring your credit score down for a temporary period. Some examples of a hard inquiry are:
- You apply for a loan or a credit card, and the financial institution runs a credit score check on you
- If you requested a credit limit increase, the provider may check your credit score
- A collection agency can check your score
Soft Inquiries
If you check your credit score to keep track of your financial health, it is a soft inquiry and does not influence your credit score. Soft inquiries have no impact on your credit rating, irrespective of how many times you check it. Here are some examples of soft inquiries:
- Checking your score
- A credit score check by a financial institution for pre-approval screenings or by an existing provider for accounts maintenance purposes.
- An employer or insurance company checking your score for eligibility purposes
Myths and Reality Related to Checking Credit Scores
Here are some of the most common myths revolving around checking credit scores:
Checking your credit report can bring your score down
This is a misconception, and you are free to check your score anytime, anywhere, and as many times as you like without it having any impact on your credit report.
Impact of Income and Employment
If you have a secure professional life and a good flow of income, you may think that it has positively impacted your credit rating. You may add on additional sources of income, considering this influence. However, your income or employment does not influence your credit rating.
Closing down Loans or Credit Cards will Improve your Credit Score
This is partially true. If you fulfill your obligation towards a loan, and after paying the outstanding, your loan stands closed, it may positively influence your credit score. However, any installments that you pay towards your loan may not have any impact on your credit score, while missing or delaying one can.
An important point to note is that closing a credit card may have adverse effects on your credit score.
A Good credit score means you are financially sound
This is a myth, as your credit score has nothing to do with your bank balance or your financial prosperity. It only means how smartly you have managed your credit accounts and how diligently you have paid your outstanding obligations.
A Good Credit Score Can Get You Approvals
Undoubtedly a good score is one of the critical factors that can get you credit card and loan approvals. However, it is not the only criteria that affect approvals or rejections. Other factors like age, profession, income, etc., also play a critical role in approving approvals for debt.
How to Check Your Credit Score for Free?
You just have to follow a few simple steps to check your credit score:
Step 1 βΒ You can visit the CIBIL website or a financial app like OneScore: Credit Score Insight App, where you can check your Experian & CIBIL score.
Score 2 βΒ You must click on the βKnow my CIBIL scoreβ section
Step 3 βΒ You need to log in using aΒ CIBIL report password
Step 4 βΒ Your credit score will reflect on the screen within seconds
When Should You Check Your Credit Score?
You can check your credit score anytime and anywhere. You must specifically be more active on your credit score screening in the following circumstances:
- Before you apply for a loan or credit card
- When you want to improve your credit score
- When you apply for a credit limit increase on your credit card
- After you settle a loan
Conclusion
It is highly recommended to keep a vigilant check on your score so that you can supervise it, monitor it closely, improve it, and maintain it high. Also, make sure you are aware of the myths and facts related to credit scores to make informed decisions in the long run.