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Your Credit Score
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What affects your score?
Quick Tips
- • Pay bills on time
- • Keep credit usage low
- • Don't close old accounts
- • Monitor regularly
What is a Credit Score?
A credit score is a three-digit number (300-900) that represents your creditworthiness. It's calculated based on your credit history and helps lenders assess the risk of lending to you.
Higher scores indicate better credit management, leading to easier loan approvals and lower interest rates. Your score is influenced by payment history, credit utilization, and length of credit history.
Credit Score Ranges Explained
Understanding where your score falls helps you make informed financial decisions
Poor – This indicates quite a lot of credit issues and you may need to take a good look to improve it for favourable outcomes
Average – This is close to reaching a good credit score but needs improvement
Good – This indicates a responsible credit history which may get you favourable interest rates
Great – This score shows consistency in repayment and a very good history with no defaults or penalties
Excellent – This means you are eligible for all kinds of loans because your credit history is Excellent
How Does the Credit Score Work?
Your credit score is calculated by authorized credit agencies such as TransUnion CIBIL, Equifax, and Experian. It is based on your credit history, which reflects how you have managed and repaid credit in the past.
If you have a long credit history and consistently made timely payments, you'll likely have a good credit score, making it easier to secure a personal loan with favorable terms.
Conversely, if you've missed payments or been late in repaying, your credit score will be lower. This could result in your loan application being rejected or being offered a loan at higher interest rates.
What are the factors that affect credit score?
Make sure you have a good credit score and then getting credit becomes extremely easy.
Factors that affect credit score are as follows:
| Payment history 35% | This is the most important factor, and it accounts for about 35% of your score. Banks or lenders want to see that you have a history of making your payments on time. |
| Amounts owed 30% | It accounts for about 30% of your score. Make sure that you are not using too much of your available credit. |
| Length of credit history 15% | Accounts for about 15% of your credit score, where you have to show that you have a long history of using credit responsibly. |
| New credit 10% | This factor accounts for about 10% of your score, where lenders want to see that you are not applying for too much new credit at once. |
| Types of credit 10% | Accounting about 10% of your credit score, banks or lenders want to see that you have a variety of credit accounts, such as credit cards and loans. |
Loan Benefits
Save up to 3-5% on loan interest
Get approved in 24-48 hours
Access to larger loan amounts
Lower premium rates
Benefits of a Good Credit Score
A good credit score opens doors to better financial opportunities and can save you thousands of rupees over time.
Get approved for loans and credit cards at lower interest rates
Lenders are more likely to approve you for a loan or credit card if you have a good credit score. They will also offer you lower interest rates, which can save you a lot of money in the long run.
Get a better deal on insurance
Insurance companies often offer lower rates to people with good credit scores. This is because they are considered to be lower risks.
Qualify for a mortgage with a lower down payment
If you have a good credit score, you may be able to qualify for a mortgage with a lower down payment. This can save you a lot of money upfront.
Why do lenders check CIBIL Score
Lenders check your CIBIL score for several reasons. Listing out the reasons for you to discover the best tricks.
| REASON | DESCRIPTION |
|---|---|
| Assess Creditworthiness | Shows if you can repay based on past credit behavior. |
| Evaluate Risk | Higher scores mean less risk; lower scores indicate trouble. |
| Make Loan Decisions | Key factor in approving or denying loan applications. |
| Set Interest Rates | Affects the interest rate; better scores often get lower rates. |
| Determine Credit Limits | Helps decide how much credit you can get on loans or cards. |
| Prevent Fraud | Confirms your identity and spots potential fraud. |
Why is your CIBIL Score Low?
A low CIBIL score can arise from various factors:
| Missed Payments | High Credit Utilization |
| Limited Credit Mix | Short Credit History |
| Frequent Hard Inquiries | Defaults/Bankruptcies |
How to improve the credit score?
Improving the credit score is important for accessing better loan terms, lower interest rates, and increased financial opportunities.
Some effective ways to help you boost your credit score:
| METHOD | DESCRIPTION |
|---|---|
| Pay Bills on Time | Ensure all loan and credit card payments are made on time. |
| Reduce Credit Utilization | Keep usage below 30% of your total credit limit. |
| Diversify Credit Mix | Have a variety of credit accounts (credit cards, loans). |
| Check Your Credit Report | Regularly review for errors and dispute inaccuracies. |
| Limit New Credit Applications | Avoid applying for multiple accounts at once. |
| Keep Old Accounts Open | Maintain older accounts to lengthen your credit history. |
| Set Up Payment Reminders | Use reminders or automatic payments for timely payments. |
| Work with a Credit Counselor | Seek advice from a credit counseling service if needed. |
FAQs on CIBIL Score
A credit score is generally the numerical representation of an individual's creditworthiness. It is a three-digit number ranging from 300 to 900 which tells about your credit accounts, total debts, repayment history, and other related information based on credit reports.
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