#FinancialBytes: 6 facts you never knew about your credit score
In financial terms, Credit score is a three-digit number that can help determine your chances to get a loan. Banks and other financial institutions often use it to decide whether you should be issued a credit card/loan or not. However, the concept is surrounded by much ambiguity. Hence, to help you out, here are 6 important facts to know about credit score.
Your savings/investments are not considered
Have large fixed deposits, high-performing shares, and top-notch Mutual funds, but still low on your credit score? Well, the fact is that your investments and savings have nothing to do with your loan eligibility, according to CIBIL. In fact, your credit score is simply a reflection of your credit history. This implies that information concerning only your loans, credit cards, EMIs will be considered.
Making several soft inquiries about credit score won't affect it
You can make multiple direct inquiries about your credit score through any credit bureau or an authorized third-party entity. Such inquiries are termed as soft credit inquiries as they do no impact your credit score in any way. However, when creditors, such as banks, and credit card companies inquire about your credit score, they are called hard inquiries, as they affect your credit score.
No credit history doesn't mean a great credit score
You might opine that if you never take a loan or credit card, or simply put, if you have no credit history, then your credit score should be marvelous. However, that's not how credit score mechanism works. Interestingly, even if you have no credit history, you still hold a credit score. However, the same won't be very impressive.
Credit bureaus can't edit your credit score/credit reports directly
Although the task to prepare and update your credit score and credit reports is of Credit bureaus, but they can't directly edit or change this information. This is so because their job is simply to obtain your credit information from your lenders (read banks, credit card companies etc.) and use it to summarize into a credit score/credit report, and supply it back to them.
Other unknown facts
Free annual credit report: You are eligible for a free-of-cost credit report once each year, in accordance to the Reserve Bank of India (RBI) directions. Low credit-score doesn't mean no loan: Although credit rules/policies vary from bank to bank, a low credit score doesn't necessarily mean no loan at all. You can still get a loan, perhaps on different terms, like higher interest rates.