Your credit score can determine whether you qualify for loans, what interest rate you’ll pay, whether you’ll be able to finance a new car or if a landlord will consider you a suitable tenant. Even potential employers can request to see your credit report.
Mocheko Chaka, head of Pulse at financial services provider, DirectAxis, says that by law you are entitled to one free credit score annually from any of the credit bureaus. But he warns that only checking your credit score once a year may not be enough.
Here are three reasons why it’s a good idea to keep an eye on your credit score and some easy ways to do it.
1. Knowledge is power
It pays to know your financial profile – literally. A better credit score will enable you to get better interest rates on loans and other credit facilities.
Although the credit bureaus will only provide one free credit score a year, there are other ways to keep tabs on how well or poorly you’re being rated. There are a number of online tools that enable you to access your financial rating.
2. Early warning stops mistakes and scams
Credit bureaus can and do make mistakes. You’re more likely to pick these up if you regularly check your credit rating. A sudden drop may indicate that something’s wrong. If this happens you can contact a credit bureau to find out why and if there isn’t a reasonable explanation, it may be a mistake.
The other possibility is that someone is using your personal details illegally, posing as you to borrow money or open accounts. The sooner you find out about this, the faster you can react and minimise any damage.
3. Checking gives you control
Regularly checking your credit profile provides information about what is influencing the rating, gives you a good understanding of how to improve it. By limiting negative behaviour, such as not paying accounts on time, and responsibly managing your debt you can gradually increase your credit score.
“There are lots of reasons people don’t check their credit scores – they think it’s too difficult or are scared of what they might find. The reality is with the online tools available, it’s quick and easy to do and knowing what it is puts you in a better position to maintain or improve it,” says Mocheko.
“It’s how the financial world sees you and by understanding the sort of impression you’re making you can do something about it.”