A credit score helps in technically evaluating the profile of a borrower. A good credit score helps the consumer in many ways. A high credit score leads to increased purchasing power. Let us know all about the credit score and how one can improve it?
What Is A Credit Score?
A credit score is a three-digit number. Basically, it enlightens the lender about the payback capacity of the borrower. So, what is the range of the credit score? Well, the credit score ranges from 300 to 900. Here, 900 is the highest credit score and 300 is the lowest. A person with a low credit score is more likely to bounce the installment than a person with a higher credit score. There are many factors that go into determining your credit score, including your payment history, the amount of debt you have, and your credit utilization ratio.
What are the benefits of having a good credit score?
- A good credit score can help you get approved for loans with lower interest rates.
- A loan at a lowered interest rate will lead to savings.
- A credit score with higher numbers can help you get approved for credit cards.
- If you want the approval for an insurance policy with lower premiums then a good credit score is the key.
Check your credit score here!
Top 8 Things To Do To Improve Your Credit Score
A credit score in the range of 300 to 549 is considered poor. If you’re looking to take out a personal loan, one of the first things lenders will look at is your credit score. A good credit score indicates to lenders that you’re a responsible borrower who is likely to repay your loan on time. Conversely, a low credit score could lead to a higher interest rate on your loan or even cause your loan application to be denied altogether. There are a few things you can do to improve your credit score and make yourself a more attractive borrower to potential lenders.
- First, be sure to make all of your payments on time. Be it the payment of the utility bills, credit card bills, and any other debts you may have.
- You must note here that late payments can stay on your credit report for up to seven years.
- You should try to keep your balances low on your credit cards to avoid maxing out your cards.
- Always remember to dispute any negative items on your credit reports, such as collections or bankruptcies, with the credit bureau.
- Do not shy away from opting for a higher credit card limit if you are a frequent user.
- A smart credit card user regularly checks his/her credit score and ensures the stability of the score at a positive level.
- Study and match the types and periods of a loan with your requirement and eligibility to have a smooth functioning.
- Remember improving your credit score takes time. Patience is the key to a good credit score
Why and how is the credit score calculated?
The official mandate of the RBI clearly states the importance of calculating the credit score. The report on the monetary habits of a consumer is important for all banks as they are in the business of lending. A bank would never risk its money to someone who cannot pay it back. A credit score in the range of 550 to 700 is considered good by any financial institution or bank. The credit bureaus or the Credit Information Companies are approached by banks when they are about to lend money to a borrower. On the basis of your credit report, the banks or the financial institution takes decisions over the loan
You can get your free credit scores on various platforms too! Below is a list of some of those platforms to check your credit score.
- Bajajfinserv
- Bankbazaar
- Paisabazaar
- TataCapital
A credit report can also be accessed by applying to any online or offline medium of a Credit Information Company. You will need to fill in these details to apply for the report.
- Name
- Date of birth
- PAN number
- Any other identification number asked by the CIC
- Amount of Demand Draft as required by the CIC
Conclusion
The credit score is a part of the detailed credit report. Maintenance of both the credit report and the credit score is important for a borrower. Do follow the above steps to improve your credit score in order to fulfill your requirements.