What Does Your Credit Score Reveal About Your Financial Health?

When you Apply for a Personal loan or any credit for that matter, one eligibility criteria that take precedence over all others is your credit score. The credit score is drawn by credit bureaus such as Experian, Trans Union, CIBIL, and is necessarily an indicator of your financial discipline.

The credit score is offered in the form of a three digit number and ranges from 300 to 900. As is evident, a higher score indicates great financial discipline, and greater creditworthiness, while a low score denotes a subpar repayment behaviour. If you are new to the concept of credit scores, here is the broad classification of credit scores for you. 

300 – 600

Primarily known as Sub-Prime, a score in this range is considered poor and is indicative of one’s inefficient management of finances, and general inability to repay debts on time.

601 – 650

This category is known as Near Prime and is often suggestive of the borrower’s on-going struggle with some loan repayments, While this may not be the ideal score range, it does indicate a fair share of financial discipline, albeit with an urgent need for improvement.

650 – 750

Also termed as the Prime, a score in this range shows that the borrower maintains a respectable amount of financial discipline, but still has some room for improvement. A score in the Prime category or above can prove to be ideal when the borrower is applying for an unsecured loan.

750 – 850

Generally known as the Superprime, a score in this range reflects a flawless financial discipline. It tells the lender, that the borrower is responsible, and repays the debts efficiently.

Borrowers in this range can expect to get the best deals when it comes to the interest rates on various credit types.

A Credit Score of -1

Yes, there is an instance, where your credit score can be simply -1, and not a three-digit number as discussed above. This happens when you have no credit history at all, i.e., you don’t have a Credit Card or have never serviced a loan so that your repayment behaviour can be analysed. In this case, it can become exceedingly difficult for you to obtain a loan, especially an ensured one such as the Capital First Personal Loan.

Of course, it is never too late to start building your credit score. You can do so by opting for a secured Credit Card, or by making store purchases on equated monthly instalments (EMIs).

What Does a Credit Score Reveal?

Punctuality

It may come off a massive surprise to you, but as much as 35% of your credit score, depends on your timeliness to pay your bills and EMIs. While the credit bureaus ignore some delays, continued delays often adversely impact your credit score.

Creditworthiness

If your credit score is Subprime and above, you are generally considered as a responsible borrower. The lenders consider you worthy of credit and do not hesitate in approving your loan applications. A poor score on the other hand often reflects a lack in willingness to repay the credits, which acts as a red flag for most lenders.

Need for Credit

Your credit report often encompasses, your desire to get credit. Too many applications for different types of credit within a short time are indicative of your exceedingly high dependence on credit in your day-to-day life. This is inferred by the credit bureaus, and consequently by the lenders as though you are in a severe cash crunch and are unable to manage your finances efficiently. As you may have guessed, it puts a negative impact on your credit score.

Then again, if you are consistently using more than 30% of the credit limit on your card, to the extent that in some case you exhaust the monthly limit, it reflects your credit hungriness, which puts you in the wrong light.

This consistent need for and dependence on credit often adversely impacts your credit scores, as well as your ability to qualify for a loan on favourable terms.

Now that you know all about credit score, and what they reveal about your financial worth, wait no more before you order a free copy of your credit report from any of the leading credit bureaus of the nation, and analyse your report carefully. For all you know, this one step can bring you much closer to your dream of getting a hassle-free credit such as the Capital First Personal Loan.

Also Read: How to Improve Your Credit Score by Getting a Personal Loan?