Definition of Credit Score:
Credit score can be simply defined as a rating system that numerically represents the ‘Creditworthiness’ of a borrower. It is in the form of three-digit numbers. The credit score ranges from a minimum of 300 to a maximum of 900.
More importantly, as a borrower, you need to understand that the closer your Credit score is to 750+, the better your chance of securing any type of loan or getting a credit card in India.
It is also advisable that you perform a Credit score check regularly.
Ranges of Credit Scores :
Detailed explanation of Credit score Calculation:
Steps to get your Free Credit Score: Perform a credit score check online effortlessly.
Benefits of a Good Credit score :
Few reasons for you to maintain a Good Credit Score
A significant advantage of having a Good Credit Score is that the chances of you getting a loan from the lender at a minimum interest rate increases. It is because a lender on seeing your Good Credit Score will consider you ‘Creditworthy.
When you have a Good Credit Score it shows the lender that you have a good loan repayment history and therefore you are ‘Creditworthy’. A major reason for any financial institution to offer you the Best Loan in India at the lowest interest rate available.
Like loans you need to have Good Credit Score to have a greater chance to get the Best Credit India, that offers lifestyle-related benefits such as CASHBACK’ and ‘REWARD’ points. This is because possessing a Good Credit Score represents a reliable ‘Credit Behaviour’ and shows your ‘Creditworthiness’ to the lender.
Reasons for a Low Credit Score:
Credit score plays a very crucial role to determine your creditworthiness with lenders, as it reflects how likely you are capable to repay borrowed funds. A low Credit score may label you as a high-risk borrower, which can lead your loan application being rejected. It is important to understand the underlying reasons for a low Credit score to maintain a healthy score.
Here are some common factors that contribute to a low Credit score:
Consistently missing or delaying the repayment of your EMls for loans or credit card balances can significantly impact your credit history, lowering your Credit score.
Using a large portion of your available credit limit (more than 30%) on a regular basis can signal to lenders about your financial eligibility. This can harm your credit score over time.
A poor mix of secured and unsecured loans can also affect your credit score. It’s advisable to have a higher proportion of secured loans (like home loans or mortgage loans) compared to unsecured loans (such as personal or business loans), as they are typically seen as less risky by lenders.
When you apply for multiple loans or credit cards in a short period, lenders make hard inquiries into your credit report. Each inquiry can lower your credit score, and various inquiries within a short period can address desperation for credit, which may make you appear to be a risky borrower.
Addressing these issues can help you improve your credit score and increase your chances of loan approval.
How do you download a PDF for a credit score check online?
To download your Credit report, follow these instructions.
Credit Information Companies in India:
There are four companies in India providing credit information.
To check your Credit score, you need to provide the following information:
Credit reports are used to evaluate an individual’s creditworthiness by analyzing their credit history, including loan repayments and any outstanding debts. Lenders, banks, and financial institutions rely on these reports to decide on loan approvals, set credit limits, and establish interest rates. Credit reports are essential for assessing financial behavior and managing credit risks.
A soft inquiry can occur in several situations, such as:
Yes, a hard inquiry can cause a slight temporary drop in your Credit score. When you apply for credit, the lender makes a hard inquiry to evaluate your creditworthiness, which can show up in your credit report and affect your score for a short time.
Your PAN card serves as an official identification linked to your financial records and bank accounts, enabling a credit score check free online by PAN number.
No, they are not identical. The term “credit score” refers to the numerical rating provided by various credit agencies, such as TransUnion CIBIL, Experian, and Equifax. The specific score provided by TransUnion is known as your CIBIL score.
Lenders review your credit score to check your creditworthiness and determine your loan repayment ability. Your credit score helps them evaluate the risk involved in lending money to you, ensuring they make informed decisions.
No, soft inquiries do not impact your credit score. Since you’re not applying for credit, there is no negative effect. You can safely check your Credit score without worrying about lowering it, even if you’re considering applying for a loan or credit card.
A hard inquiry occurs when a lender checks your credit score and reports it as part of the loan or credit card application. This type of inquiry can temporarily decrease your credit score.
The impact of multiple credit cards depends on how you manage them. If you have several cards with high limits and you either overuse or underuse them, it can negatively affect your score. Responsible usage, however, can have a positive impact.