1. Prevention is better than cure

Most of us are unaware of our credit scores and fail to understand why a certain loan application was rejected. When you check your credit report regularly, you are aware of the reasons that may be damaging your score in any way.

Banks or other lenders are required to report your EMI statuses to these agencies to keep the report updated. Even other negative or positive activities like a cheque bounce will be reflected in your score accordingly. When you check your credit report regularly, you will point out if the credit agency has recorded an activity incorrectly and fix it. These credit bureaus also provide services where they recommend action plans to improve your score.

2. Avoid loan rejections

A lender is bound to check your credit score before giving you a loan. When the lender contacts the credit bureau for your score, it is known as a 'hard inquiry.' Each of these is accounted for and reflected in your score. Too many inquiries could make you look "credit hungry" and puts you in a bad light.

However, when you check the score yourself, it is known as 'soft inquiry.' Soft inquiries do not reflect in your credit report. It is, therefore, better to check your score before you apply for a loan to avoid rejection by working towards improving it.

3. Get better deals

With a good credit score, banks would be glad to lend money to you and in an attempt to attract you to their bank, they will provide you with attractive interest rates. Apart from getting cheaper loans, a good credit score could also fetch you pre-approved loans.

Financial companies allow users to check your credit scores for free and provide you with pre-approved loans in a tie-up with various lenders. In such a case, when you have access to your latest credit score, you can check for offers from different lenders and pick the best one to suit your needs.

Some banks provide cheap loans to those with scores over 750. You can inquire for yourself if your bank has such an offer and regulate your score accordingly.