While it has been about 12 years since the credit bureaus started to function in India, there are still a lot of misconceptions that people at large have on account of how the credit score gets impacted and how it further impact their financial life.
While still, people are getting to know what not to do or better put what are the factors that will have a negative impact on their credit profile, understanding on what will not have any impact is still to be understood.
Following are the three things that will not have any bearing on the credit score.
Let us understand one thing clearly; checking your own report would have zero impact on the score. There are two kinds of enquiries, hard enquiry a soft enquiry. A hard enquiry is when a lender or a bank accesses your data captured in the bureau. Every time you apply for a loan, the bureau data is analyzed and a higher number of such enquiries in a short span will definitely have some impact on the score since.
However, when an individual pulls his own report, it gets flagged off as a soft enquiry and does not have any bearing. So in case you want to pull out your report but are apprehensive on this front, do so without any hesitation. Contrary to the common belief you can pull out the data at any frequency (even daily) without fear of a negative impact. In fact, it is good to keep checking it from time to time.
You may be aware that as per a directive from the Reserve Bank of India, all bureaus in India are liable to extend a free report every year to all individuals.
While applying for a new loan or a credit card would get captured as a hard enquiry, the denial of the facility again would not impact the credit score even a bit. Let us understand it clearly that the three digits numeric expression is an outcome of the activities on the loans and credit cards issued to you. Till the time you are approved and issued a facility, it would not form part of the bureau base and hence would not impact the score. A denied application would not lead to your name reflecting in the loan defaulter list since these are two distinctly different things.
While a loan rejection may have an impact on your financial goals as the availability of funds would have addressed a need, please be aware that the denial of a facility would not influence your credit score in any ways.
Are you getting charged a higher rate of interest? While you may want to bring down that interest, rest be assured that the same would not hurt your score.
What will actually hurt your credit profile is non payment or delayed payments on the existing trade lines. You need to ensure that there are adequate balances in the account before the installment due date and that you are paying at least the minimum amount due, if not the total amount due, before the due date of your credit card billing cycle. Inability to repay in time will definitely have an adverse impact and can influence your borrowing capability in future.
So go ahead, withdraw your report, check your status before you apply for a loan and do not worry even if it gets denied. Just be careful in not applying for a loan with multiple lending institutions in a short span of time. Pay on time and lead a happy credit life.