What is Credit Score?
A credit score is a 3-digit numeric summary of your credit history that represents your past credit behavior and how well you have managed your credit products, like home loans, business loans, auto loans, personal loans, or credit cards. Credit score also commonly referred to as CIBIL Score is primarily a measure of your ability to borrow from Banks/NBFCs. CIBIL score is calculated and generated based on the consumer’s credit information provided by the lenders monthly.
Simply put, your credit score shows lenders whether you are a reliable borrower with minimum risk or a risky one, as well as the likelihood of you repaying a new loan in time. When you apply for any type of loan or a credit card, the lender requests a credit report check from the credit bureau to know your repayment capability and creditworthiness.
CIBIL score ranges from 300-900 in which the higher your credit score, the more likely lenders are to approve you for new credit. Usually, a credit score of 750 and above is considered a standard benchmark and preferred by lenders for loan or credit card approval. For a few banks/NBFCs, even a credit score of 700+ is also considered for credit card approvals.
you often miss or delay paying the EMIs of your loans or your credit card bills on time, your score is negatively impacted. On the other hand, if you have been disciplined with the repayments of your EMIs and credit card bills, and have not displayed any credit-hungry behavior by frequently applying for credit, your credit score shall tend to increase.
Benefits of a Good Credit Score
Your credit score is one of the first things that a lender Bank or NBFC will check while evaluating your loan or credit card application. In case your CIBIL score is low, the lender might reject the application without even considering it further.
If your credit score is high, the lender will look into other details to determine if the applicant is creditworthy. Thus, a good credit score increases the chances of your loan application being approved.
However, your credit score is not the only factor considered for a person’s ability to secure new credit. Lenders also consider your income, repayment history, debt-to-income ratio, employment history, profession, etc. before approving or rejecting your loan or credit card application.
A good CIBIL score would not only help you access credit, but it may also help reduce your interest outgo for a loan. Many Banks/NBFCs offer preferential low-interest rates to applicants with a good credit score.
What is a Good Credit Score?
Today, most lenders consider a credit score of 750 and above from CIBIL or any credit bureau as a good credit score. Getting the loan or credit card application approved becomes relatively easier if you have and maintain a CIBIL score of 750 or above and as close to 900.
It is possible to have a CIBIL score of 750 or above and have a credit score from another bureau below 700 at the same time. Hence, you must keep a tab on credit scores from multiple bureaus. It is advisable to check your credit score once every month.
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