Check Credit Score

A credit score is an assessment of an individual’s credit behaviour, such as how likely they are going to pay a loan back on time, based on the information gathered from their credit reports.

The credit score range is a 3-digit numeric value and usually varies from 300 - 850. 

If you apply for any form of credit, the first thing that a lender checks is your credit score and history of past loan repayments. It helps them analyse your creditworthiness and how much risk is associated with offering you a loan or credit card. Therefore, it is advised to do a credit score check online or offline before applying for credit.

• Credit score required for a personal loan: Most banks and NBFCs consider a credit score of 750 or above good to approve a personal loan application. A higher CIBIL score makes you a less risky borrower for lenders because they think you will less likely to turn into a defaulter. A high score can help you get a higher loan amount at better interest rates and affordable tenure. 
• Credit score required for a home loan: For housing loan approvals, most lenders require borrowers to have a credit score of 650 or above. A score between 650 and 749 is considered good for home loans as these are secured loans. A credit score below 649 is considered average and needs to be worked on.
• Credit score required for a credit card: The credit score needed for obtaining credit cards may differ for each credit card issuer. However, a credit score of 750 or more is usually considered good for getting approved for a credit card.

Below are some points explaining why and how a credit score is important for availing of a loan and credit card:

• It is the first thing that all lenders check when you apply for any loan or credit card. Hence, check your online credit score or do it offline before applying for the loan.
• It gives borrowers an idea about whether they can repay the borrowed loan amount on time or not. Hence, maintaining a good credit score is important.
• If you are going to apply for a personal loan, you must know that the required credit score for personal loan is 750 or above. Similarly, an acceptable credit score for home loan is 650 or above, and a good credit score for credit card is 750 or above.
• One of the benefits of a good credit score is that lenders might offer you loans and credit cards at attractive interest rates. You can also get a discount on the processing fee, a higher loan amount eligibility, and other benefits.
• If you have an excellent credit score, you will be considered a low-risk. It increases your chances of getting instant approval on loans and credit cards.
• A good credit score can make you eligible to get the best-rewarding credit cards in the market, with the lowest interest rates, cashback, travel points, etc.
• You can also get approved for a higher credit limit on your credit card with a good credit score as creditors will likely offer you more money because of your creditworthiness.
• A good credit score makes you eligible for a pre-approved loan offer. A pre-approved loan offer is offered by banks to their existing customers who have an excellent credit history.

Following are the four top credit rating agencies in India:

1. TransUnion CIBIL Limited

Credit Information Bureau India Limited (CIBIL) is a complete credit bureau that gives credit analysis for individuals as well as organisations. The CIBIL score ranges from 300 to 850, with 720 or more being an excellent score. Transunion CIBIL members comprise of all major financial institutions, banks, lenders, and Non-Banking Financial Companies (NBFCs). The bureau provides one free credit report each year.

2. Experian

Experian was established in the year 2010, and it conducts an analysis of the credit reports of companies and individuals. The Experian credit score ranges from 300 to 900. You can get your report in just 20 days.

3. Equifax

Equifax gives portfolio scores as well as risk scores, with credit scores typically ranging from 1 to 999 for individuals. It has been working as an approved credit rating agency since 2010. Equifax provides different reports like industry diagnosis, portfolio management, risk management or credit fraud report for companies.

4. CRIF High Mark

CRIF High Mark is approved by the Reserve Bank of India (RBI). It conducts analysis for the credit rating of corporates as well as individuals. Their credit rating varies between 300 to 850.

Below are the most common factors that can affect your credit score:

• Payment history: It is the most important factor in credit scoring, and even a single missed payment can have a negative impact on your credit score. Lenders want to be assured about your timely debt repayment when they are sanctioning a new credit to you. Your payment history comprises 35% of your credit score.
• Credit utilization ratio: Your credit usage, as represented by your credit utilization ratio, is another important factor in your credit score. Your CUR is calculated by dividing the total revolving credit currently used by you by the total of all your revolving credit limits. This ratio can give a view of how reliant you are on non-cash funds. Using above 30% of your available credit limit is a negative to creditors. CUR accounts for 30% of your credit score.
• Length of credit history: 15% of your credit score is how long you have held credit accounts. This includes the length of your oldest credit account and newest credit account and the average length of all your accounts. A longer credit history means higher credit scores.
• New credit: The number of credit accounts recently opened by you and the number of hard inquiries that lenders make when you apply for credit comprises 10% of your score. Having too many accounts or multiple credit inquiries can indicate increased risk and can hurt your credit score.
• Credit mix: Individuals with excellent credit scores often have a diverse portfolio of credit accounts, including a car loan, home loan, credit card, student loan, or other credit products. Credit scoring systems consider the types of accounts you carry and how many of each you have as a sign of how well you manage a wide range of credit products. Your credit score is 10% of your credit mix accounts.

If you are thinking about how to check my credit score, here are some tips to help you improve your credit score:

• Pay your loan EMIs and credit card bills on time. Do not delay or miss payments at any cost.
• Do not depend on credit much. 
• Try to decrease your credit utilization ratio (CUR) if you tend to max out your credit card limit often.
• Check credit score free online, and if there is any error in your credit report, bring it to the credit bureau’s notice and get it rectified at the earliest.
• Have a good mix of secured and unsecured credit in your profile.
• Avoid frequent loans or credit card applications. At least wait for six months after availing of the recent credit before you apply for a new loan or credit card.
• Avoid closing your previous credit cards, as a longer credit history will help lenders make credit-related decisions easily.
• Seek advice from MyMoneyMantra’s credit experts for improving your credit score significantly.
• Understand credit score risk factors, such as payment history, the amount owed, length of credit history, new credit, types of credit in use, etc.

If you are thinking about how to check credit score for free, here is the answer. According to CIBIL’s credit policy, you can check free credit score once a year from CIBIL. Follow the steps given below to get free credit score for free from CIBIL’s website:

• Visit the official website of CIBIL, the top credit bureau of India https://www.cibil.com/freecibilscore.
• Now click on the ‘Get Your Free CIBIL Score’ option and create your account by providing the following information:
  • Email ID
  • Password
  • First Name & Last Name
  • ID Type: Passport Number, Driver’s License Number, Voter ID Number, Ration Card Number, or PAN Card (Income Tax ID Number).
  • ID Number
  • Date of Birth
  • PIN Code
  • Mobile Number

• Click on the ‘Accept & Continue’ option.
• Then enter the OTP received on your registered mobile number.
• Select whether your want to pair your device or not.
• Choose the appropriate answers to the 3 displayed questions.
• Provide your City, Income and Income Type if you want to know more about customized loan and credit card offers available based on your CIBIL Score and Report.
• Your credit score, along with all the important information about your credit report, will be displayed on the screen.