Why is it really important to know the credit score? Wouldn’t you really want to know what the lenders think about you? What is a good credit score? What happens if this score is low? How to improve your credit score? What if it is a good score – how you can benefit? How do you get the issues resolved, if any, in your credit report? We will tackle all such questions in this blog.
When we apply for a loan – mortgage loan, personal loan, credit card or basically any liability, then while processing your loan application what the bank or finance company would do is to check your creditworthiness. They reach out to any of the credit monitoring agencies and check your credit score and report. It is one of the determining factors for approval (or rejection) of a loan or credit card application. If you have a good credit score, it can even help you in negotiating a good interest rate for your future loans! So, a good (or a bad) credit score follows you even if you change your residence, city or even country! It may be extremely difficult to get a loan if the previous credit history is bad.
There are four credit bureaus in India monitoring credit scores and reports:
In addition, there are intermediaries like Paytm, Paisa bazaar etc. who also provide the credit score.
Credit score indicates your creditworthiness. A credit report includes your credit history, personal information along with details of your loan accounts and credit cards.
This is a three-digit credit score. You can get a free score from each of the above credit agencies, once a month. For CIBIL, the score is between 300 and 900, the higher the score the better it is. So, basically, if your score is bad, say lower than 700, then it can be very difficult to secure a new loan or the interest rate could be very high since the finance company perceives it as a higher risk.
Various factors are used for the calculation such as credit history, credit utilization, credit mix and duration along with other factors. Various factors can affect your credit score like credit utilization limit, repayment history, unsecured loan proportion, Guarantor for someone, regularly requesting for increase in credit limit, looking out for loans periodically etc.
You need to submit a dispute resolution form with the necessary details with the agency. The credit bureau will then update your credit report after verifying the information from the lender.
This would happen if you have never had any credit history so far. This will be especially true for students just starting to make a living or someone who has never had a loan or credit card in the past. In such cases, it is better to take a credit card. If you find it difficult to get a credit card (because there is no credit score – thus getting into a loop!), consider taking a credit card against a fixed deposit (banks would not have any objection there), continue to make full payments on time and build your credit history. You will then have a credit score soon.
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