Credibility or potential to repay the debt is assessed by your credit score. In most scenarios, it is indicated as a numeric score that potentially considers your past loan repayments and credit record. The RBI (Reserve Bank of India) has given its approval to 4 distinct Indian credit bureaus to compute credit scores. Companies such as CIBIL (Credit Information Bureau (India) Limited), Experian, CRIF Highmark and Equifax are the ones who compute your credit score after fetching information from your financial institutions like lenders and creditors. Every month these credit bureaus revise your credit score based on your credit behaviour, and the monthly update is sent to you either through email or message. Now, many of you may wonder how to ‘check my credit score? To check your credit score, you can visit any online lending marketplace to check CIBIL score by PAN card or any of the credit bureau’s websites.
One of the preferred credit bureaus is CIBIL, as they provide accurate credit scores based on your credit behaviour. Most lenders and creditors prefer to fetch from CIBIL as they substantially consider their credit score computation to be accurate and to the point. This brings us to the point that CIBIL is India’s one of the popular credit scores. The credit score of CIBIL varies between 300 and 900, with 750 and above is a good credit score.
|750 – 900
|This scoring range is considered excellent. Financial institutions offer credits and loans at the lowest interest rates, as this category is looked upon as the one with the lowest default rate.
|650 – 749
|This range of credit scores is looked upon as good. An individual with a score in this range may not be able to leverage the best loan conditions via negotiation.
|550 – 649
|This scoring range is considered fair. For the individual with this credit score range, the interest range offered by the lenders would be higher. Even the processing charge levied may be higher.
|350 – 549
|This credit score range is considered subpar. Searching for a credit card or loan for this credit score category might be extremely challenging.
|NH / NA
|This infers no history or not applicable.
Having a good credit score of 750 and above is important as it provides the below-listed benefits –
∙ You can obtain the credit card as per your suitability with the best benefits and features – With the credit card of your choice, you can simply make the most out of it from the benefits provided by it in the form of cashback, discounts, reward points etc.
∙ Faster loan approval – Financial institutions can quickly accept your loan applications if you have a good credit score. Not just can you avail faster approval, but you also can negotiate well for a lower processing fee.
∙ Lower rate of interest – An individual with a good credit score may bargain to get the best rate of interest on loans and credit cards.
∙ Loans become highly inexpensive – Getting a lower rate of interest and processing charges on loans automatically brings down your overall loan cost.
How can you form your credit score?
Remain organized and meet the set deadlines
You, as an individual, must remain consistent with your repayments and must meet the deadlines for repayments. Better management of your debts has a positive impact on your credit score. Your credit rating is impacted, and you may additionally incur a fee if you do not repay your debts on time. Thus, if all your credit repayments are made on time, it can result in the enhancement of your credit score.
Additional Reading: Check CIBIL score by PAN card
Use your credit wisely.
Placing an application for several loans at the same time may bring down your credit score massively, as lenders may consider you a credit-hungry individual. Avoid availing of a lot of debt at once and consider using your credit in a sensible manner. You must request 1-2 loans in a specific time period. It would be considered wise to repay one loan at a time and then opt for the other one once you have repaid your previous loan. This shows you are a responsible individual and can use your credits in a disciplined manner.
Monitor your borrowed credit
Making a new application for credit is something that you must do only if you need the fund and hold the potential to repay it back on time. Note that you must always refrain from using credit more than your credit limit as this may not just lead to unneeded fines as well as interest fees but even can bring about a massive reduction in both your credit score and credit limit.
Check for inaccuracies in your credit report.
It is a must to check your CIBIL regularly and report any kind of anomalies. In rare events, CIBIL might include inaccurate info in your report, which may result in a delay in the entry of certain elements. Possible errors such as paying off a loan that has not been updated on the report, certain credit activity mixed with others or any negative info that is very old may be added to your report, which might harm your credit score. Constantly keep a close check to detect any such errors and instantly report them to the concerned authorities.
Form a credit history over the time-period
The goal is to avail the correct amount from the lender, use it appropriately and repay it back on time in full. To keep your EMI low while availing of a loan, you may choose longer repayment tenure. However, here you must remember while higher repayment tenure lowers your loan EMI, it automatically enhances your overall interest constituent. Thus, ensure to choose a repayment tenure as per your repayment capacity always. In case you do not require a loan, then try building your credit score by availing of a credit card. Ensure to use your credit card for all your regular transactions, repay the bill in full and on time and maintain a lower credit utilization ratio (CUR). All these allow you to have a good credit score.