Average Credit Score Range

If you are planning to apply for a loan or a credit card, then your credit score would matter a lot. It is an indication of the credit risk (or no risk) that you possess to money lenders. Credit score ranges from 300 to 900 where any score above 750 is a good credit score. Let us know in detail about the average credit score range.

Credit Bureau Agencies in India

In India, Credit Score is given by the following credit bureaus:

• CIBIL  or Credit Information Bureau of India Limited
• Equifax
• Experian
• Highmark

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Decoding the Range of Credit Score

As discussed above, a credit score ranges anywhere from 300 to 900. Here is a comprehensive breakdown of the credit score levels.

• Excellent Credit Score (800 and above)

If your credit score falls under this range, you are considered to be highly responsible with finances. You are considered to be the prime candidates for instant loans at the low interest rates. You may have no or little history of late bill payments and are considered low risk for defaulting credit agreements.

• Good Credit Score (700-800)

If your credit score is between 700 and 800 are considered to be financially responsible when it comes to credit management. You might have missed a payment or two but generally, most of the payments including loan repayments and credit card bills are paid on time. Also, the credit utilization ratio is optimum. You will get a loan from banks easily.

• Average Credit Score (500-700)

If your credit score falls in the range of 500 to 700, then you have an average credit score. This means you will have to work on your credit profile. Although you might not get a loan from the bank easily, with this credit score, you are likely to get loans from NBFCs and other fintech lenders. You can improve it by paying credit bills on time, keeping the right credit mix and avoiding closing old account for a longer credit history.

• Poor Credit Score (Below 500)

Any score below 500 means that you have a history of several missed payment deadlines, default credit accounts, etc. If you visit any bank or NBFC to borrow money, you may be rejected right away or given credit at a very high rate of interest.

Note: The range mentioned above is only indicative in nature and different credit bureaus have their own formula and range for credit score calculation. You may have a credit score of 850 with Experian and CIBIL score of 725 at the same time. It is recommended that you check your credit score from multiple credit bureaus for free at Paisabazaar and find if you fall in the Good or Excellent category.

How is CIBIL Score Calculated?

Each credit bureau has its own algorithm to calculate an individual’s credit score. This is the reason why the credit score of these agencies often differs. However, the major element that affects your credit score is your credit history. The score is calculated based on the following major factors:

• Credit Repayment Behavior

A credit score is calculated based on your repayment behavior. If you have been paying all the credit bills on time, then it will have a positive effect.

• Credit Utilization Ratio

This is the ratio of the credit that you have availed with the total available credit. In order to score high, it is important to maintain a balance between the two. It is recommended to keep this ratio below 30%.

• Credit Type and Duration

It is important to keep a balance between the types of credit that you have opted for. A mix of secured and unsecured credit in your profile shows that you are good at handling all kinds of credit. However, you will not be denied a loan just because you have only unsecured loans in your profile.
Similarly, the duration of your credit accounts affects your credit score. The older the account, more is the trust of lenders and you are rewarded with a better score..

• Excessive Number of Hard Inquiries

When you apply for a loan or a credit card, the lender pulls your credit information from the available bureaus. This is called a hard enquiry or pull enquiry. If you make too many applications, your credit score may get pulled down. Too many hard enquiries portrays you as credit hungry. It is recommended to maintain a gap of three to six months before you make a fresh application for new credit.

Read More:  CIBIL Score Calculation

How to Turn your Average CIBIL Score into an Excellent CIBIL Score?

If you have an average credit score, then you are likely to improve it by following some of the best practices, as mentioned below:

1. Pay Dues on Time

To improve your credit score, you must pay your dues/bills on time by setting monthly reminders. Try not to pay after the due date. You can set up autopay or provide standing instructions for those bills from your account.

2. 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 use 30% or less of the credit limit regularly. However, it is okay to have a higher credit utilization ratio once in a while.

3. 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.

4. Stop Shopping 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 in a small time frame might actually affect your score negatively.

Also Read: Easy ways to improve your credit score