Friday, 27 April 2018

Does Credit Monitoring Hurt The Score?

A credit score has become an important financial number that affects several aspects of one’s life. It is not just helpful for people who are looking to take loans in near future. Everyone must improve credit score as you never know when an emergency situation strikes and you are in need of funds. More and more people are waking up to the importance of keeping their credit in good standing. Checking one’s credit report is an important step in achieving this goal. There are several benefits of monitoring your score and report. It helps one understand the current financial position before applying for a loan or credit card. Checking the score gives you a fair idea of your chances of approval and whether you will be eligible for discounted rates. Monitoring one’s credit also helps uncover fraudulent activities or mistakes or errors in reporting. But many people fear that monitoring the score will itself hurt the score. Is it true?
Not at all! It is a big myth that checking the score is bad for one’s credit. Let’s see how.
Enquiries made regarding your credit do affect your credit score to some extent. 10% of your score is based on the number of enquiries made. But these include only hard enquiries. When you apply for new credit, the checks made by the lenders to see if you qualify for credit are recorded in the history as hard enquiries. A number of such “hard pulls” indicate signs of financial trouble and hence damage your score. Checking your own score is recorded as a soft enquiry. They are not related to your search for new credit. Hence, these are not shared with the lenders and they are not included during credit score calculations.

Hence you can check your score on a regular basis is a sign of good credit management. It will help you in the long run. You can get a free credit report from all the credit bureaus once every year. Make the most of this opportunity to see whether your history is in good standing. If you wish to check more often than this, you can order your report online by paying a fee. You can also subscribe to credit monitoring services. Requests made by them on your behalf will be treated the same way as you make the enquiries. A credit monitoring company keeps checking your credit report on a regular basis. Since these checks are not done for the purpose of applying for a loan, these are considered as soft pulls. Whenever there is a change in the score, the company will alert you. It investigates into any unexplained changes that might occur. These regular updates are also useful if one is trying to increase credit score.

If you do not have sufficient time to monitor the credit yourself, or if you find these numbers too confusing, it is always better to consult a credit monitoring company. After all a good credit score will help you get approved for loans at discounted rates. You will become eligible for the best credit cards. All this will help in saving thousands of rupees in the long run. With a bad credit you will only be eligible for loans for low CIBIL score that charge exceptionally high interest rates.

Identity theft cases have become quite common. Any negative information on fraudulent accounts opened in your name can bring a sharp dip in your score. A credit monitoring company can also help uncover mistakes and fraudulent activities. If it identifies any errors it will even report it to the bureau on your behalf. The bureau will verify the error and correct it if it did a mistake. So monitor your credit without any worries, and stay on top of your financial goals.

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