Credit Score Agency in India
In India there are a total of 4 credit bureaus licensed by the Reserve Bank of India (RBI). These credit bureaus calculate credit score on the basis of an individual’s credit information, which is submitted periodically by banks, credit card companies, and other money-lending institutions.
It is worth mentioning that each credit bureau India has a different CIBIL score range. Your credit score can fall anywhere from 300 to 900 of range, with 300 being the lowest and 900 being the highest credit score. Higher the score lower the risk of getting loan applications rejected by lenders.
Credit Score Ranges
Take a look at the credit score range that most bureaus and lending institutions consider while evaluating your credit applications:
Different Ranges of Credit Scores
Note: There are chances of having a CIBIL Score of 760 or above and having a credit score from another bureau below 700 at the same time. Thus, it’s imperative to keep a tab on CIBIL score from multiple bureaus. You must keep a track of your credit score once every 3-4 months at least.
Credit Score Impact
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.
Quick Ways 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.
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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?