From fulfilling small expenditures to long term expenditures, a loan borrowed from a bank can help you in meeting all your expectations. Although, before lending the money the bank has some factors to examine before they can process your credit report. The most important factor out of which is your credit score or CIBIL score. It is expected for an individual or a business to have a score somewhere between 300-900. The ideal credit score is 750, but a user should always strive for a perfect credit score which is 900.
It is always easy to get a loan or a credit card if the credit score is ideal. But merely having a good CIBIL score doesn’t help, which is why it is important for you to maintain these scores which can easily be done by ensuring timely payments and there are no delays faced for the same.
In today’s time, people like to go cashless and rely more on online transactions or payments by using cards such as debit or credit cards. Where a credit card is recognized as the best option as it develops your confidence. But a credit card is issued seeing an individual’s creditworthiness which is determined by the credit report of an individual.
So, if you are someone who is a new borrower of a loan or credit card, it is very important for you to be aware of all the associated factors, their benefits and relevance. And the online portal is one such platform that helps individuals to check their credit score through an online portal.
This article will cover all the above-mentioned sub-heads to make the process of availing your credit card or loan smoothly.
Credit Information and Score – The Who’s and How’s
The information regarding the calculation and maintenance of the credit score is looked after by Credit Information Companies, these are known to be an organisation assigned by the RBI. The functions that these organisations are supposed to perform are to gather analysis and information regarding business credit.
The oldest company in this is the Credit Information Bureau India Limited (CIBIL). Credit Information Companies check credit scores and match an individual or business’s total available credit limit with their savings and spendings. The result is shown as CIBIL or Credit Score, which ranges between 300 to 900. This is how lenders can assess the individual or business reliability.
Relevance of Credit Score
A credit score is a three-digit number that indicates your creditworthiness. When you apply for a loan or credit card, lenders check your credit score first. It is used to figure out whether or not you can repay the loan promptly. Hence, it is essential to keep your credit score high. By making all your payments on time, checking your credit reports frequently, paying off your existing credit card debt, and keeping your credit utilisation below 30%, you can maintain your credit score. When you apply for a loan or a credit card, lenders check your credit score first. This gives them an idea of whether you are capable of repaying the loan. Therefore, maintaining a high credit score is crucial.
The credit bureaus in the country calculate credit scores through the cic calculator by considering several factors like payment history, credit exposure, credit mix, credit inquiries, and the length of credit history. The range of a credit score is 300-900. In general, lenders consider a credit score of 750 and above as ideal. To have a credit score near 900, you should always take steps.
Credit Scores and History after opening the First Line of Credit
If a user has a proper credit score already, it becomes easier for them to apply for any kind of credit card or loan. But just having a good credit score doesn’t help, it is important for a user to maintain their score.
It is important for the user to ensure that utilisation ratio does not get affected i.e., GOA (Gross Outstanding Amount) divided by GCA (Gross Credit Available). The ideal percentage of such ratios remains to be under 30%. So, if in case there are payments that may be due on a loan, or a credit card matches all the other credit that has been imposed on your cards. Calculating the ratio of such payments is pretty easy. All you are required to do is divide all your payments with the monthly amount credit that needs to be paid.
Credit Score and Information – The Accessible El Dorado
The credit score, its information and its history that is checked by the CIBIL is done through the data that has been provided to them through the bank. Such reports can easily be shared with other banks as well and sometimes even to the user. Which is why a new borrower is always advised to get a report from the CIC of at least 6 months before finally opening the credit line. It somehow acts beneficial for the new user as if they find any kind of error during the process of audit, they can easily remove the errors suggested by making their payments on time and settling dues, if any.
FAQ
What exactly is the credit score?
A credit score is a measure of your creditworthiness that ranges between 300-900. It states your financial status and shows whether you will be able to repay your loan debts which assure the lenders of your financial responsibility.
What is a good credit score?
670 to 739 are considered good; 740 to 799 are considered very good, and 800 and above are considered excellent. Higher credit scores mean you have demonstrated responsible credit behaviour in the past, which may make potential lenders and creditors more confident when evaluating a credit request. Lenders generally go with credit score check online to find applicants with credit scores 670 and above as acceptable or lower-risk borrowers. Those with credit scores from 580 to 669 are typically seen as “subprime borrowers,” meaning they may find it more challenging to qualify for better loan terms. Those with lower scores – under 580 – generally fall into the “poor” credit range and may have difficulty getting credit or qualifying for better loan terms.
How to generate a credit score?
A Credit Report is a comprehensive and detailed statement of an individual’s history about his activities in the credit market. Credit agencies track all of his/her activities and equate it to a number between 300 and 900. This number helps lenders determine the risk factor of loaning money to a particular creditor. Generating a report and score directly from a credit agency can cost you close to Rs.1000 on average.
Why is credit information important?
Credit information is the most important factor that hampers our overall ability to borrow a loan. When applying for a credit card or loan the first and the foremost thing that gets checked is creditworthiness. For instance, if a user has demanded a high amount of loan but the credit score is known to be much lesser than the amount then there are probable chances of your loan getting rejected. Therefore, it is important for a user to keep a regular check on the same.
Why is your credit score important to you as a borrower?
A credit score is a three-digit number that indicates your creditworthiness. When you apply for a loan or credit card, lenders check your credit score first. You can use it to figure out whether you can repay the loan promptly.
Why is credit important for a house?
The higher the credit score the lower is the probability for your loan to get rejected. Your credit score is your 3-Digit number that determines whether you meet the specified guidelines of the bank or not. And your credit history acts as a document that allows you to see whether the payments earlier were made on time or not.
Does having good credit mean you are a low-risk borrower?
A big Yes, the better the credit score the lesser are the chances for your loan to be rejected. Therefore, it is always advised for a user to keep his/her credit score perfect by maintaining a regular payment cycle. Also, it is suggested to keep a regular check on your credit score in order to maintain them right.
