How Strong is Your Credit Score?

Updated on: 25 Dec 2023 // 4 min read // Personal Loans
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Your credit score (CIBIL Score) is the numeric rating, ranging from 300 to 900, given to you on the basis of your repayment behaviour. The credit rating is often used by the lenders to assess your ability to repay a loan, depending on which the terms of your loan including the down payment and the rate of interest are determined.

Factors that determine your credit score

Here are some of the crucial aspects that have a substantial impact on your credit score-

30% of your credit score is determined by your past repayment track-record, including loan payments, over-dues, and defaults.

25% of your credit score is determined by the ideal mix of secured and unsecured loans.

25% of your score is assessed on the basis of your credit utilisation ratio. The higher the ratio, the lower your score.

Other factors such as the overall number of loans in your name, the frequency of loan applications and alike determine the remaining 20% of your credit score.

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Credit Scores and Implications

Before we go on to understand how strong your credit score is, let us first take a look at what the different credit scores imply.

Credit Score – 300-549

This score is considered very poor by the lenders and may have serious implications on your chances of getting approval on loan applications. You may even be required to pay a fee or deposit as security, in order to get a credit.

Credit Score – 550-649

This is a fair score, however, it will still mean that you are considered a low credit rating borrower, and may only get a loan on comparatively higher rates of interest.

Credit Score – 650-749

This is an average score; wherein there is a good chance that the lender will put their trust in you, offering you a fair deal.

Credit Score – 750-799

This is a very good score, exhibiting that you are a responsible borrower. In this case, most lenders will be willing to offer you credit at fairly reasonable interest rates.

Credit Score – 800-900

This is considered as an exceptional credit score, thus ensuring that you get credit at the best possible interest rates from the lenders.

As can be clearly understood, you need to have a credit score of 750 or above to ensure that the lenders consider you a responsible borrower, with the ability and willingness to pay off your loan. Not only will such a high score make it exceedingly easy for you to get an approval on your loan application, but will also ensure that you get favourable Personal Loan Interest Rates, making it a cost-efficient deal for you.

How Strong is Your Credit Score?

In India, there are primarily 4 Credit Bureaus, which have been authorized by the Reserve Bank of India. You can request your Credit Score online from the websites of any of the bureaus. All of these are reputed credit management companies and provide help to consumers in making them understand their credit health and credit analysis.

  • TransUnion Credit Information Bureau (India) Limited (or CIBIL)
  • Credit Rating Information Services of India Limited (CRISIL)
  • Equifax.
  • ICRA

You can place a request for a free online credit report citing your credit score with any of these bureaus. Once you receive the report, you can assess your scores. Only if your score is 750 or more, should you go ahead and apply for a new loan. If not, you should try to improve your credit score using one or more of the measures listed below –

  • Pay the EMIs for your existing loan on time, without fail.

Have an apt mix of secured and unsecured loans under your name.

Pay off your existing loans, and reduce the number of loans you have at any given point in time.

  • Make sure your debt-to-income ratio is low.

Pay your credit card bills in full, every single time.

We understand getting a low credit score can prove to be extremely disheartening, especially when you are looking forward to getting a big-ticket loan such as a Home Loan. This may propel you to being overly cautious with your finances, thus putting an unnecessary burden on you. To avoid this, let us inform you of some of the financial aspects, which have no bearing on your Credit Score –

  • Mobile and electricity bill payment history
  • Loan prepayments
  • Loan transfers
  • CIBIL score of your spouse
  • Frequency of checking your own CIBIL score
  • Delay or defaults in tax payments

That being said, in some cases there might be a discrepancy in your Credit Report. If you strongly feel that your score is lower than you anticipated it to be, you must analyse your report and get in touch with the Credit Bureau regarding any inconsistencies. In most cases, the bureau will respond in 30 days or less and will rectify the issue. This can prove to be tremendously helpful when you have to apply for a new loan, as an improved score can help you get comparatively low Citibank Personal Loan Interest Rates or that of any other bank, thus helping you save a substantial sum of money that would otherwise go towards the high interest.

We hope that you now know how strong your score is, and how you can improve the same.

Also Read:Everything You Need to Know About a Good Credit Score

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