Credit score is still a relatively new concept in India, though awareness about it is fast growing. Thus it is only natural that there might be a few queries related to it in the minds of most people. One may often wonder what is the need to check their score or can there be a score without loans and so on. So here we discuss five common queries that may arise about credit score.
1. I am regular with my payments; do I still need to check my credit score?
Often people who are regular with their payments feel that there is no need for them to check their score as their score would definitely be good. Despite, payment history being the most important factor in credit rating calculation, other factors like credit utilization, loan mix, loan tenure and credit enquiries also impact the final score. Thus, though you may have been regular in your payments, the score could still be affected negatively because of any of these factors. Sometimes there may be a problem in the report due to inaccurate reporting by a bank or some fault at data entry level. What’s more now you can get a free credit report once a year so do make sure you get your free CIBIL score and stay credit healthy.
2. I do not have any loans; will I still have a credit score?
Loans are one of the sources that help create a credit trail and the other source that helps in creating credit history is credit card usage. Credit cards are more common than loans as more users are likely to have them as compared to loans which are need based. So even if you do not have a loan then your credit card usage can also help you in creating a credit history and get a credit score. It is important for all credit card users to be regular in their payments and keep the utilization ratio in check to maintain a healthy credit score. Those who do not have a credit history get a score of NH or 0 and those who have a credit history of less than six months get a score of NA or -1.
3. Does my spouse’s score impact my score?
This is another common query especially for women when they get married and adopt the husband’s surname. Marriage does not link or impact the score of an individual to their spouse; both partners maintain their individual score and the loans and credit cards in their name only will be included in the score calculation and credit report. If both partners decide to apply for a loan jointly then credit score of both will be considered, though depending on the loan type importance might be given to the score of the primary applicant.
4. Will checking my score impact it?
Whenever one applies for loans whether home loans or personal loans, the prospective lender seeks the credit report of the applicant and based on that they will approve or reject the loan application. When a FI asks for a credit report then it is known as a hard enquiry and it is recorded in the credit report; too many hard enquiries impact the credit rating negatively. However if one checks their own score then it is known as a soft enquiry and it has no impact whatsoever on the credit rating. On the other hand it is recommended that everyone check their credit report from time to time so that they can assess their credit health and also ensure that there are no errors in the report.
5. How long does negative information stay on the credit report?
This will depend on the type of information; repayment history for 36 months is included in the credit report. Thus any default made in that period stays on the report while credit enquiries for last two years are included in the report. Other information like a settled account stays on the report for 7 years. It is important to mention over here that more recent information impacts the score more than older information.
So hopefully this information has helped you in getting a better understanding about credit score, however if you still have a few doubts please do hare them with us.