Unknown Facts About Credit Score Everyone Should Know!
Do you know the importance of a good credit score? If not, know the interesting facts about good credit scores and how to improve credit score
Anjali Singh
Assistant Manager
What is a Credit Score?
A Credit score is a three-digit number that is counted from an individual's credit history. A person's credit history is calculated by looking at the payment history and other financial activities. If a person is willing to opt for an unsecured loan then the credit score plays a very important role in getting a loan approved. A person with a credit score of more than 700 is considered good for approval of an unsecured loan online. To avail the loans and financial support it is suggested to boost your credit score on time and increase your chances.
1. Credit Score vs Credit Rank
A three-digit number that presents the credit history of a person that ranges from 0-900, a person having Credit 750 and above shall have more chances of getting the loan approved.
On the other hand, Credit's rank ranges from 0-10 and shows the company's creditworthiness. A company with a Credit rank closer to 1 shall have more chances of getting financial sources.
2. Different Credit Bureaus Mean Different Credit Scores
Equifax, Credit, Experian, and CRIF are certain credit bureaus that generate the credit history of a person. However, the uncommon fact about all these institutions is that they provide different credit scores because these institutions have different eligibility criteria for generating credit scores. It is advisable to check the credit score from different credit bureaus to completely understand the creditworthiness.
Latest Facts on Credit Score
Every applicant should know that there are some unavoidable facts about credit scores they should be aware of. In short, what you don’t know about credit scores can hurt you so it is good to know the most common facts about credit scores that are discussed below:
1. Credit Reports vs. Credit Scores
Credit reports and credit scores are different terms but are closely related to each other. A credit report is a complete list of the transactions that have a direct impact on your creditworthiness – everything from any bill payments to loan applications to availing credit cards.
Credit bureaus have a record of all that information and accordingly assign a numerical grade and that’s what exactly your credit score is. It shows how you're managing your money, which is easy to know before you go for a new house or car or apply for a credit card.
2. Credit Scores Are Based on Various Factors
Calculating your score is like a maths equation with all sorts of variables. It is based on multiple credit scoring factors with varying impacts on the score:
- Payment history
- Credit utilization
- Length of credit history
- Inquiries and new credit
- Diversification of credit
3. Even Small Unpaid Dues Harm Credit Scores
Payment history creates a great impact on your credit score. Regardless of your bank balance, a due payment can have bad consequences for your credit score.
4. Tracking Your Credit Score Can Help Monitor Fraud
Check for inaccuracies or fraud on your credit report if you find your credit score incorrect. Even in case your score seems correct it is good to check your credit score occasionally and go through the transaction history.
5. Checking Your Credit Score Is Free
You can check your credit score for free through our website and know your creditworthiness.
6. More Credit Cards Affect Your Score
Having diverse credit is good, but opening so many credit cards can be a red flag. By doing so your score will take a hit, no doubt you will get offers from many retailers but know how you’re getting into it and the bad effect it will have on your credit score. Closing old credit cards is not a good idea, let them remain open as the closed ones can reduce your length of credit history, which has a negative effect on your credit score.
7. Credit utilization
It is the amount of credit that an individual is utilizing in relation to the credit limit. Paying timely EMIs and spending less than the credit limit is a good indicator of an increased credit score.
8. Soft Credit
Many websites are making individuals cautious about decreasing their credit score if they check it continuously. But this is not apt, checking credit scores individually from credit score checking websites shall never harm your credit score. It is called soft credit, in addition to this if you are applying for multiple loans and keep getting rejected it shall impact your credit score in the worst manner.
9. Investments are not included in the credit score
Credit scores have no record of the investments done by a person. It simply relies on the pattern you are repaying your loans, credit card bills, etc.
10. Say no to multiple credit facility
When you are applying for multiple credit facilities it makes you seem like a credit-hungry person and impacts your credit score. It shall also add a burden to your shoulders of handling multiple EMIs. It is always advisable to take fewer loans and credit facilities and plan wisely.
Myths About Credit Score
There are numerous myths about credit scores, let's debunk those myths in this article one by one:
- A Negative Credit Score Follows You Forever
- Checking Your Credit Score Hurts Your Credit
- Rent Payments Help Raise Your Credit Score
- Credit Scores Are Universal
- Your Spouse’s Credit Score Affects Yours
- A High Salary Helps Your Credit Score
- Every Missed Payment Impacts Your Credit Score
- Your Employer Can See Your Credit Score
- It’s Hard To Improve Your Credit Score
- Your Credit Score Doesn’t Matter
Conclusion
The article gives you a brief of unknown facts that people usually do not know about credit scores. When a person opts for the credit and pays the EMI, it builds the credit score of a person. It is important to understand that a good credit score means a person has a high chance of getting a loan approved. A loan is not a burden but a planned decision with My Mudra. Check your credit score and apply for financial aid quickly. I would advise you to keep these three words in mind forever: "Pay on time" always. Credit scores matter a lot in availing of any loan whether it is a fast approval personal loan or a business loan.
Also Read:
- How to Improve Credit Score in India (Step-by-Step Guide)
- Top Benefits of Having a Good Credit Score
Anjali Singh
Assistant Manager
Hey there, I'm Anjali Singh. With over 6 years of experience in finance, I specialize in creating content on banking, loans, and financial planning. My goal is to simplify complex financial topics and help readers make informed decisions through my articles.
