A good Credit Score is the key to having a good banking relationship as it has the potential to lift your worthiness to take a loan. Without a score close to 750, it is difficult to get a loan sanctioned. Despite its integral role in determining a candidate’s borrowing potential and purchasing big-ticket items through EMI, Credit Score is a mystery to many.
Here are five things that you probably were not aware of about your Credit Score:
You Can Get A Loan With Zero Credit Score
If you haven’t opened a credit account with any financial institution ever, your Credit Score would be ‘zero’, as banks would not have any credit record under your name. However, this does not mean that you cannot take a loan. If you have zero Credit Score, banks will not say no to you but they might ask you to provide income proof, ITR copy for the past two years, and utility bills to assess your repayment potential before lending you money.
Closing Old Credit Card Can Drop Your Score
Closing an old Credit Card account reduces your credit limit, thus reducing your Credit Score for a temporary time period. An old credit account shows your transaction history, so closing it would wipe off your record. If you opt for closing a Credit Card account, try and increase your credit limit on your existing cards. Although the reason for which you decide to close your account does not reflect on your Credit Score, make sure you do not close a Credit Card account to escape an overdue outstanding loan amount. It is important to take a closure letter from the bank.
Closing An Unused Credit Card Account Can Help You In The Long Term
An unused Credit Card is relatively more prone to misuse, so any unauthorised usage will lead to a drop in the Credit Score and loss of money as well. You can be caught off-guard if banks and financial institutions change the terms applicable on the card, leading to an impact on your Credit Score. So, if you have an unused Credit Card account, it is best to close it. For any future needs, you can apply for a new card based on your requirement.
Accessing Your Credit Report Can Impact Your Credit Score
If your credit report is assessed in the context of loan application, your score drops by a few points. Banks need to look at your report to be able to assess your creditworthiness. Multiple loan applications only reduce your score further. However, if you check your score online, it is called a soft inquiry and doesn’t impact your Credit Score.
High Income Doesn’t Mean High Score
Credit Scores indicate your creditworthiness in terms of borrowing practices and repayment pattern. The size of your income has no impact on the score if there is lack of discipline in your repayment pattern.
Credit Scores are becoming more and more important every passing day with even employers and insurance companies looking at it to profile an individual. So, make sure you maintain a healthy score by going for a smart debt plan, wherein you have a proper repayment plan in place before you take a loan.
BankBazaar is a leading online marketplace in India that helps consumers compare and apply for Credit Cards, Personal Loans, Home Loans, Car Loans and Insurance.