Credit Score Ranges: Meaning and Impact

Credit score typically ranges from 300-900 and is further categorized in various categories, such as no score, low, fair, good and excellent. The categorization of credit score ranges and credit score may differ, as per each Credit Bureau or Credit Information Company (CIC). The credit score range provides an indication of the credit risk that borrowers pose to the lenders (Banks/NBFCs).

Usually, a credit score is a 3-digit numeric that depicts your creditworthiness and past credit behaviour. Any credit score of 750+ or as close to 900 assures high chances of loans or credit card approval. Thinking of your credit score and where you fall in this range? Check and download your free credit report here and get monthly updates with no impact on your credit score.

Credit Score Ranges

Let us have a look at the credit score range that Credit Information Companies or Credit Bureaus consider while evaluating your new credit applications of loans and credit cards:

Please Note: The credit score range mentioned above is only indicative and may vary from lender to lender and bureau to bureau.

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Importance of maintaining a Good Credit Score

Good or high credit score depicts the consumer’s creditworthiness and past credit behavior and marks the borrower at low-risk for lender. Thus, it helps the consumer in availing loans at ease, along with instant credit card approvals. High credit score increases the negotiating options for the borrower and enhances the chances of qualifying for best loan deals. Therefore, try to improve your credit score to further avail credit at low interest rates with additional benefits.

Credit Information Companies (CICs) in India

In India there are a total of 4 CICs or credit bureaus licensed and authorized by the RBI to calculate and generate credit scores for consumers across the nation. These credit bureaus generate credit scores for individuals and credit ranks for the businesses, companies, enterprises and organizations based on the credit information provided by the banks/NBFCs, and other financial institutions on a monthly basis. Below stated are the four leading credit bureaus operating in India:  

• TransUnion CIBIL

• Equifax

• Experian

• CRIF High Mark

It is worth mentioning that each credit bureau in India uses a different algorithm to calculate and generate credit score and credit rank. Your credit score ranges from 300 to 900, with no credit score or 300 being the lowest and 900 being the highest credit score. Higher the credit score; lower the risk of getting loan applications rejected by lenders. 

Impact of your Credit Score in the Borrowing Process

The impact of credit score is as follows:

• Excellent Credit Score: An ‘Excellent’ credit score reflects that the borrower had consistently paid his/her loan installments and credit card bills on time and had no negative mark  on their credit report. Lenders find it hard to say no to borrowers with excellent credit scores. This kind of credit score implies that you’ll get various loan benefits such as quick loan approval, low-interest rate, and favorable deals on all kinds of loans.
• Good Credit Score: Credit Score of most people fall in the ‘Good’ category. People with credit scores in this range have good chances of getting approval on loan application as it indicates the borrower is dependable and can be given loan but the risk is still there. Therefore, depending on the lender, you may or may not get as many loan benefits as you might have expected.
• Fair Credit Score: It indicates that borrowers have performed neither too good nor bad when it comes to handling their loan payments and credit card bills. They are more at a risk of getting their loan application rejected. Even if lenders grant them a loan, they will not get it at favorable terms and conditions. The loan will most likely be given at a high rate of interest, high down payment and fewer or no benefits.
• Poor Credit Score: There is no chance for people with poor credit score to get approval on their loan application. It is a high-risk category for lenders. Banks and other financial institutions are always wary of people with poor credit score as they do not trust them to pay the loan amount on time. It shows that the borrower is financially unstable, has excessive debt, or has missed repayments in the past. Even if a lender agrees to give you a loan, they will ask for a guarantor to reduce the risk.

Also Read: How to Download Your CIBIL Report

Tips to Improve Your Credit Score

If your CIBIL score lies anywhere below the excellent credit range then remember that you always can improve it. It may take some time but by making a few changes in your methods of credit handling, you can reach the excellent credit score range in no time. If you have an average credit score, then you should likely improve it by following some of the best practices, as mentioned below:

• Pay Dues on Time

To improve your credit score, you must pay your dues/bills on time by setting monthly reminders. Try to pay your dues by the due date. You can set up an autopay option or provide standing instructions for those bills from your account.

• Balance Credit Utilization Ratio

Another important factor that affects your credit score is the credit utilization ratio. In order to improve your average credit score, you can either increase your credit limit or try not to overuse it. The golden rule is to keep your credit utilization ratio below 30% regularly. However, it is okay to have a higher credit utilization ratio once in a while.

• Do Not Close Old Accounts

Till the time you reach an excellent credit score (say above 800), avoid closing old accounts. Since the credit score depends upon the length of the credit history, closing those old, unused credit account actually may end up lowering your credit score.

• Stop Applying for New Credits

Avoid applying for a credit card or loans unless actually needed. Too many hard inquiries like applying for multiple loans or credit cards on a frequent basis actually affect your score negatively.

FAQs

Q. Why is your credit score different at different credit bureaus?

Ans. Credit score differs from applicant to applicant and bureau to bureau, as each credit bureau or Credit Information Companies (CICs) uses different mathematical algorithm to generate and calculate credit score. These unique and complex statistical formulas are differently used by credit bureaus.

Q. What will happen if my CIBIL score is in the Poor credit range?

Ans. If in case, your credit score is in poor or bad credit range then it shall be difficult to get your credit application approval. Try to build and improve your CIBIL score in order to avail credit products with added benefits.

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• 6 Benefits of Having High CIBIL Score
• What is a Credit Report? Steps to Download Credit Score Report
• What are the 10 best ways to build up my credit score?
• No Credit History? Here’s How You Can Build One
• CIBIL Commercial Report & CIBIL Rank
• Check Free CIBIL Score For SBI Loans
• CIBIL Score For Personal Loan
• CIBIL Vs Experian Vs Equifax Vs Highmark
• Common Myths About Credit Score
• How Can Low Credit Score Impact Your Daily Life?