Good Credit Score: Everything You Need to know

If you want to avail a loan, you need a good credit score. What is a good credit score? A credit score, as many people know, is basically a three-digit number which summarizes credit worthiness. The credit scores offered by all the credit information agencies in India are equally valid. Credit Information Bureau of India Limited, popularly called CIBIL, collects and stores data on your past repayments in banks, on any loans or credit cards.

The popular credit information bureaus are TransUnion CIBIL, Experian, Equifax and CRIF High Mark.

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What is a Good Credit Score?

Credit Rating Bureaus in India

A credit rating bureau or agency is an enterprise that gives credit ratings to individuals and institutional borrowers. It also rates the debt instruments like corporate bonds, commercial paper, municipal bonds, government bonds and so on.

Breakdown of Credit Score

A credit score may be between 300 and 900. The lowest score is 300 while the highest score is 900. The closer you are to 900, the better. A good credit score ranges from 750 to 850. In other words, anything above 750 is considered to be a good credit score.

When the credit score is lower than 700, NBFCs and banks consider you risky to lend. Keep checking your credit score and credit report on a regular basis to stay updated at all times. It can be checked online and offline as well, but many individuals prefer checking it online for convenience. Check free credit report and credit score at IndianMoney.com.

What is Your Credit Score and What it Means?

Range of credit score	Grade of credit score	Interpretation
Lower than 600	Average or lower than the benchmark	The loan approvals are tough and the interest rates are higher.
600-649	Average credit score	The loan applications are worth considering, but the loan options are limited.
650-699	Fair credit score	Limited loan options are available.
700-749	Good credit score	The loan approvals may be faster just like a very good score.
750 plus	Very good credit score	The loan approvals will be really fast and the borrower can negotiate for a better interest rate.

Prime Benefits of a Good Credit Score

Banks offer a lot of benefits to individuals with a good credit score. The prime benefits include lower interest rates, instant approval, higher loan amounts, increase in bargaining and negotiation power and so on. Many banks nowadays take into account credit report and credit score to check the credibility of a loan applicant and grant loans.

CIBIL score must be in excess of 750 to get loans sanctioned. A CIBIL score is computed by taking into account the credit utilization ratio or CUR, profession and time in current job, location, unsecured and secured loans and earnings level of a loan seeker.

See Also: How To Get My Cibil Report Online?

Factors Impacting Credit Score

Your payment history accounts for 35% of your credit score. Make sure you have a good repayment history. Very serious issues like foreclosures, insolvency and late payments can have an adverse impact on credit score.

Don’t pile on debt and keep the credit utilization ratio below 30%. As you start making repayments, the credit score improves. If you don’t have credit history, avail a credit card and build credit score with timely repayments. Loan defaults, settlements and new credit card accounts are other factors impacting the credit score.

Tips to Maintain a Good Credit Score

Use credit cards wisely. Make credit card payments prior to the due date. Keep the credit card balances as low as possible. Monitor and manage all debts like loans and credit cards.

Ensure full payments if possible and don’t fall for the minimum amount due on credit card. Credit cards can be consolidated in order to have lower outstanding balances. If required, consult a financial advisor to always maintain a good credit score.

See Also: How To Correct Credit Report?

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