A credit score is a numerical representation of an individual’s creditworthiness, which is based on their credit history and various financial and loan repayment behaviors. It is used by lenders to evaluate the risk of lending money or extending credit to a person. The score typically ranges from 300 to 900, with higher scores indicating better creditworthiness.
Here is Everything To Know About Credit Scores
In India, credit scores are provided by various credit bureaus. The major credit bureaus in India include:
- TransUnion CIBIL: One of the oldest and most widely used credit bureaus in India.
- Experian: Another prominent credit bureau that provides credit scores and reports.
- Equifax: A global credit information company that operates in India as well.
How to Get a Free Credit Score?
To obtain your credit score for free in India, you can use the following methods:
- Through the Credit Bureau Websites: You can visit the official websites of credit bureaus like CIBIL, Experian, or Equifax and follow their processes for obtaining a free credit report. They may offer one free credit report annually.
- Through Financial Institutions: Some banks and financial institutions provide free access to your credit score as part of their services. Check if your bank offers free credit reports.
- Through Online Platforms: There are several third-party financial platforms and websites that offer free credit scores. These platforms often collaborate with credit bureaus to provide this information.
It’s important to note that while checking your credit score through official channels is generally free, some third-party services may charge fees or offer additional services for a fee. Make sure to use reputable sources to access your credit score and report to ensure accuracy and security.
The credit score is a number used by banks and other loan-granting institutions to understand the creditworthiness of a person. This is a number between 300 and 900 and is calculated by the credit information bureaus. In India, there are 4 authorized credit bureaus that calculate credit scores – Experian, CRIF High Mark, Equifax, and TransUnion CIBIL.
Credit scores show how well individuals can manage their finances and reflect their ability to repay loans such as borrowed credit. Having a credit score at or near 750 or close to 900 ensures higher chances of loan or credit approval. Let us now understand the credit score ranges and what each range represents.
Credit Score Range
- 601 to 649: Bad credit score and major repairs are needed. The chances of approval are less. Lenders may ask for security or other supporting income certificates from you to establish your loan repayment capacity.
- 650 to 699: General credit score. With this type of score, you can easily get loan and credit card approval. But, there is still time for improvement. Getting a score above this range will get you better interest rates.
- 700 to 749: Good credit score. You will get access to some of the best loans and credit cards in the market.
- 750 to 900: Best Credit Score Range. Lenders will provide you with the best loans and credit cards. You can also avail premium benefits and offers from the lender. The challenging part is to keep your credit score in this range consistently.
How To Improve credit score?
Getting a good credit score is not an easy process. But, people who make a consistent effort to improve their credit score can see results. There are a few ways to get here.
- Pay your bills on time: It is important to pay your EMI and credit card bills on time. A long history of timely payments will give you an excellent credit score. To avoid missing payments on time, you can set up auto payment alerts (but you’ll have to make sure you don’t overdraft your account). If you don’t pay any bills on time, you can contact your credit card issuer to discuss the issue with them. You can request them to give you some more time.
- Keep a healthy credit mix: If you have not taken any loan and have not used any credit card till now, you will not have any credit history. Therefore, you should borrow an appropriate mix of secured and unsecured loans to build your credit profile. This will help you get personal loans with the lowest interest rates and higher loan amounts.
- Monitor your credit report regularly: Credit bureaus may sometimes enter incorrect information, or your credit report may not contain disputed details. These can reduce your credit score. In these cases, you should file a dispute with the relevant credit bureau and get this inability resolved. This solution will improve your credit score.
- Limit the number of hard queries: There are two types of inquiries on your credit history – soft inquiries and hard inquiries. Soft inquiries are when you are checking your credit, giving a potential bureaucrat the authority to check your credit, checks performed by financial institutions you are doing business with, and credit card companies that look at your file.
- Check if they can offer you pre-approved credit. These types of inquiries will not impact your credit score. At the same time, hard inquiries will impact your credit score. Hard inquiries are made when you apply for credit and the lender pulls your credit file. Hard inquiries will appear on your credit report and will impact your credit score. Having too many hard inquiries can lower your credit score in a big way.
- Keep old accounts open: The age or length of your credit history is an important factor in how you appear in the eyes of lenders for giving you a loan. The higher your average credit age, the more favorable you will look to lenders. Therefore, do not close old accounts that have a positive credit history with timely payments. Pay the outstanding balance immediately, including delinquent or late-paying accounts. Then make sure you pay these accounts on time. This cannot erase late payments but can make your payment history look positive going forward.
conclusion
A credit score is an important factor that helps you easily get credit in the future. If you can borrow even with a low credit score
If you can get a loan or credit card, the interest rates will be high and the credit limit will be low, it is always necessary for that. Once you have achieved a good credit score, it is equally important to maintain it.
Frequently Asked Questions (FAQ) on about Credit Scores
What is a credit score?
- A credit score is a numerical representation of an individual’s creditworthiness, based on their credit history. It ranges from 300 to 900 in India, with a higher score indicating better creditworthiness.
How is the credit score calculated in India?
- Credit scores in India are typically calculated by credit bureaus using various factors such as credit history, repayment behavior, credit utilization, the length of credit history, and types of credit.
How often should I check my credit score?
- It’s advisable to check your credit score at least once a year or before applying for a significant loan or credit. Regular monitoring helps you stay aware of your financial standing.
What is a good credit score in India?
- A credit score above 750 is generally considered good in India. Lenders are more likely to approve loans or credit cards for individuals with higher credit scores.
How can I improve my credit score?
- To improve your credit score, make timely payments, keep credit card balances low, maintain a mix of different types of credit, and avoid applying for multiple loans or credit cards within a short period.
How long does negative information stay on my credit report?
- Different types of negative information, such as late payments or defaults, can stay on your credit report for varying periods, typically ranging from 3 to 7 years.
Do credit scores vary between different credit bureaus?
- Yes, credit scores may vary slightly between different credit bureaus due to variations in their scoring models and the information they have on file.
Can I get a loan with a low credit score?
- While it’s possible to get a loan with a low credit score, it may come with higher interest rates or stricter terms. Some lenders may be more lenient than others.
Does checking my own credit score affect it?
- No, checking your own credit score, known as a “soft inquiry,” does not impact your credit score. However, when a lender checks your credit as part of a loan application (“hard inquiry”), it may have a minor, temporary effect.
What factors negatively impact my credit score?
- Late payments, defaults, high credit card balances, frequent credit applications, and having a high debt-to-income ratio can negatively impact your credit score.
Can I dispute errors on my credit report?
- Yes, if you find errors or discrepancies on your credit report, you can dispute them with the credit bureau. They are obligated to investigate and correct any inaccuracies.
How long does it take to improve a credit score?
- Improving a credit score takes time, and there is no fixed timeline. Positive changes, such as consistent on-time payments, can contribute to improvement, but the rate at which your score increases depends on various factors.
Can a joint account affect both individuals’ credit scores?
- Yes, joint accounts can impact the credit scores of both individuals. Any activity, whether positive or negative, on a joint account is reflected on the credit reports of all account holders.
What happens if I miss a payment on a loan or credit card?
- Missing a payment can harm your credit score. It may lead to late payment fees, and increased interest rates, and in severe cases, it could result in default and legal action by the lender.
Is there a way to build credit for individuals with no credit history?
- Yes, individuals with no credit history can start building credit by obtaining a secured credit card or taking out a small loan.
