Financial institutions, including credit card companies will check your credit rating before they offer you any money. Your should do the same before you apply. Here’s why.
How do I see my credit rating and why it matters?
If the rating is not so good and indicates risks, approval on the loan becomes difficult to get, and you may end up getting the loan at high interest rates with lots of conditions attached. Hence, it is important for me to see my credit rating before I apply for a loan.
So, how do you know about your credit rating? To see my credit rating, I need to apply for my credit report. There are three major credit report bureaus — Experian, TransUnion, and Equifax. Most of the countries have these bureaus collecting information about the payment behaviors of the consumers and keep a record of their payment in a report. In India, Reserve Bank of India has given licenses to Experian, Equifax and Highmark for operating as Credit Information Companies.
Each credit information company adopts own way of credit score scale. For instance, CIBIL credit score ranges from 300 to 900, while FICO score ranges from 350 to 850. A lower end score indicates that the borrower is risky because he or she had made payment faults several times. Higher credit rating means that the person has been making payments on time for most of the bills and loans in the past. For such a person, lenders are willing to approve a new loan at lower interest rates due to lesser risks.
To see my credit rating, I can apply to any or all the above-mentioned credit rating companies. Know that everyone is entitled to his or her free credit report once in a year. You can log on to website annualcreditreport.com to get your free copy of credit report online.
However, I make it a point to see my credit rating report upon getting it. Many times, the credit reporting companies mistakenly record wrong payment facts and your wrong home or business address etc. before applying for a loan, ensure that you report these errors to the Credit Rating Company and request for the correction. You should also note that when you apply for a loan, the lender, private or government, will pull out your credit report from the credit rating companies and will evaluate the report. Therefore, correct all errors in the report before applying for a loan.
Advice for credit rating improvements
• Pay off your easy debts and wait for credit rating improvements before applying for a loan
• Pay off your bills and loan installments to keep a good credit history
• Check your credit rating report for errors.