Last Updated on March 21, 2023 by Hub Blogging
A credit score refers to the measure of credibility. The initial factor that lenders check when you apply for any loan or credit card is your score from CIBIL. CIBIL score full form is Credit Information Bureau (India) Limited score and you can conduct your CIBIL score check online through its website. Note that by reviewing your credit score, the lender gets an idea about whether you hold the potential to repay the amount that you have borrowed. Hence, it is crucial to maintain a good credit score. Your score is computed by 4 credit bureaus including CIBIL after factoring in various parameters like your repayment history, a mix of credit, credit exposure, credit history and credit history length.
The ones who are unaware of what is credit score is must know that a credit score is a numerical representation of your credit behaviour that ranges anywhere between 300 and 900. Usually, lenders consider your score of 750 and above to be ideal. Thus, you must always ensure to take a constant analysis of your score to know about your credit standing and if it is in a bad spot then must take the crucial measures to improve the same. Let’s have a look at the importance of holding a good score.
What is the importance of maintaining a strong score?
Makes you qualify for loans –
A high score endows you the ticket of being eligible for credit cards and loans. If you hold a strong score, it suggests that you have been constantly repaying your debt on time and in full. It even endows the lender with an excellent reason to provide you with a loan as you hold a low possibility of becoming a defaulter.
Credit cards –
Alongside loans, a heavy credit score will even assist you to avail a credit card with better benefits and rewards. With a strong score of 750 and above, you may be able to avail credit cards that match with your needs well.
Lower interest rate –
One of the crucial benefits of holding a good score is that banks may provide you with a loan at a reduced rate of interest. Factoring in your past repayment record, there is a heavy possibility that you will receive discounts on the rate of interest for loans.
Also Check: CIBIL Score Online
Higher limits on credit cards –
A high score of 750 and above will not just get you a reduced interest rate on your loans and credit cards but will even assist you in availing a higher loan proceeds. A poor score, in contrast, will lead to a lower credit card limit. Having a high score suggests that you may be able to manage your credit well and thus, financial institutions may consider providing your credit card with a higher limit.
Faster loan approvals –
Various lenders tend to provide a pre-approved loan to you if you hold a long and good credit history and score. Faster loan approvals by lenders are even one of the major advantages of holding a high score. Your loan application tends to get approved instantly and it does not come with any waiting period.
Adds good value to visa application –
If you hold a good score, it adds weight to your application for a visa. Your IT records are often considered by many countries including Canada, the US, and the UK when you place an application for a visa. Hence, holding a healthy credit score endows good additional momentum for your visa application approval.
For future exigencies –
Even though you do not view yourself applying for any credit card or loan in upcoming times, make sure you still have a strong credit history and score. A strong score comes in handy when you place an application for a personal loan, home loan, credit card or any other credit option in the future. So, it is always best to hold a good credit history as it endows the lender with a measure to understand how you behave with credit.
What are the important tips you must follow to maintain a good credit score?
∙ Pay all your loan EMIs and credit card dues on time.
∙ Avoid delaying your bills.
∙ Maintain a low CUR or credit utilisation ratio.
∙ Avoid defaulting on any credit card due and loan.
∙ Avoid making multiple inquiries for credit in a short time span.
∙ Do not close your previous or old credit cards because doing so would make you lose out on a long credit history, which may reduce your credit score.
∙ Strike a good balance between credit options i.e., unsecured, and secured credit options.
∙ Maintain a good banking relationship for feasible and cheaper loan and credit card deals in the future.
∙ Check your score timely for any error or mistake in information or data and instantly report them to the concerned authority if you find any issue with the credit report.
How is credit score calculated?
While every bureau comes with its own credit model when it is to compute your score, there are specific constant parameters, which all bureaus’ factors in. These factors include –
∙ Your payment history
∙ Your credit utilisation
∙ New credit mix
∙ Credit history length
∙ Number of direct credit inquiries
You can check your credit report at zero cost. Know here how?
Since the year 2017, the RBI (Reserve Bank of India) has made it compulsory for all the credit bureaus in India to provide at least one free report in a calendar year from each credit bureau’s website. Presently, there are overall four credit bureaus in India i.e., CIBIL, Equifax, CRIF Highmark and Experian. This basically means you can avail 4 credit reports per year. Additionally, you can also fetch monthly credit reports for free by visiting online lending marketplaces. So, why wait? If you are one of those looking to understand where you stand credit-wise and financially, then fetch your report either by visiting any of the credit bureaus of your choice or by approaching an online financial institution. In the case, you find your credit score in a bad form, then ensure to take corrective steps to improve your score.
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