Why should you freeze your credit score?
Maintaining a healthy credit score has become a critical part of our financial planning these days. After all, it is your credit score that determines how much money a bank will lend you, and what interest rate it will charge on it. Unfortunately, in an era of rampant data and identity theft, a good credit score can contribute just as much to your financial doom as it can to your prosperity. To ensure that your good credit position doesn’t become a peril, you must start thinking about freezing your credit score.
Here are four things to know:
What is credit score freezing? When you submit a loan application with a bank, the bank forwards your papers to a credit reporting agency to ascertain whether you will be able to repay the loan. The loan agency prepares a Credit Information Report (CIR) that contains your credit score and sends it to the bank. Every time you apply for a loan, or a credit card, the bank digs up your CIR – your credit score. By freezing your credit score, you instruct the rating agency against sharing your credit information with anybody. So, nobody can use your information and take a new loan or a credit card in your name.
How to freeze your credit score? Freezing your credit score isn’t that complicated. All you need to do is get in touch with the credit reporting agencies and ask them to freeze your credit report. You’ll have to provide some basic personal details to verify yourself, and your CIR will be frozen. In India, there are only three credit agencies that the RBI has authorized for issuing credit reports – CIBIL, Equifax, and Experian. If you have applied for a loan in the past few years, your credit report must have been prepared by one of these agencies. So you must call them up and freeze your CIR. You should call up all three agencies because different banks use different credit reporting agencies. Sometimes, a bank may also use multiple agencies for getting CIRs prepared. So your report may well be with multiple agencies.
Benefits of freezing CIR: Freezing your credit score prevents errant elements from using your credit details, while you scratch your head, wondering about strange expenses that have been showing up on your credit card bill. People have had multiple new credit cards taken illicitly in their name, and received unexpectedly high credit card bills, as a result of not freezing their credit scores. Traditionally, only people who fell victim to such crimes got their credit scores blocked. However, prevention is always better than cure! So it is better to get your CIR blocked before getting a really rude shock!
Unfreeze with ease! You need your credit score each time you apply for a loan or a new credit card. So if you’ve frozen your credit score, you’ll have to ask the agency to unfreeze it before you apply for the loan. You can enquire from your bank about the credit agency it uses and get your credit score unblocked with that agency. A credit score can be unblocked temporarily or permanently. So if you unfreeze it temporarily, it will again be frozen once the loan has been sanctioned.