Smart ways to evaluate your credit score

Any score is a sign of evaluation, be it the marks that you have received from school examinations or the goal scored in a football match. Your credit score, too, is a measure of how you have performed on your loans and credit card bills in the past. 

The case of high marks in a school education indicate high levels of preparedness and the goals scored during a football match indicate a great game strategy. Similarly, a good credit score is an indication of good credit behaviour. 

Looking at your credit report would give the full picture of your credit health. But if this is the first time you are looking at a credit score or don’t know how to evaluate your credit score and report, here is how to go about it. 

You should first obtain your credit score and along with it a report from any of the authorised four credit bureaus in the country. You can start evaluating where you stand with respect to credit in the following ways or shall we say ask yourselves the following questions.

Have I defaulted on any payments recently

Credit score gets impacted primarily on your credit history. Check if your monthly payments towards loans are reflected on your credit reports. An ideal way to not miss payments and become a defaulter is to keep reminders on your Equated Monthly Installments (EMI). Going one step ahead, to be on the safer side, you can also opt for ‘auto-debit’ facility, wherein the lender automatically deducts the EMI amount from your bank account on the specified date. All you need to do is to make sure that you have the funds in your account.

Do I have a balanced credit portfolio

Having a mixture of both secured and unsecured credits is an important factor in the computation of your credit score. It shows your mettle in handling multiple credits efficiently. The lenders usually prefer candidates who are familiar with all types of credit. A portfolio that consists of a secured loan such as a home loan and balanced by an unsecured credit product like a credit card, adds immensely to your credit score. 

Have I applied for credit more than I can handle

From the point-of-view of the bank, if you already have a number of new credit enquiries in the form of loan and credit card applications against your name and if these are hard enquiries, then the bank would consider you to be credit hungry or someone who wishes to get more credit than you can handle. You would do well to avoid hard enquiries beforehand by checking eligibility for the loan product that you wish to apply for. 

Is all my information correctly updated on my report 

One of the most important, but often overlooked reasons for a low score, could be due to errors on your credit report. Misreporting happens more often than you think, and such information could potentially harm your credit score. Thankfully, there is recourse available and on finding any such errors on the report it can be raised with the respective credit bureau and corrected. Usually, erroneous information like incorrect personal details, account balance can be disputed. 

The writer is the CEO of CreditMantri.com