Want to Know How Your Free Credit Score India is Calculated?
You may not have checked your credit score recently but there is a major possibility that someone else has. That’s Right! If you have applied for a loan or just received an attractive credit card offer in your Inbox, it simply means that someone has just accessed your three-digit numeric history in order to determine the amount your can avail and the interest rate you need to pay for the same.
So, here comes one important question,i.e. What basically goes in free credit score India? How your score is calculated? And, why it is so important when it comes to availing a loan/credit card?
Let’s just answer each of your question in the article below.
The term credit score basically represents an individual’s credit history and repayment record. In other words, a summary of all credit accounts and payment history. So, if you are someone who has availed any sort of loan or own the credit card/s, the same will be included in your Credit Information Report (CIR). However, the report also includes the data of your late or missed payments as well as defaults, if any. If we talk about India, there are CIBIL, Equifax and Experian- the three most highly reputed credit agencies are there that actually maintain and collect all the financial record of individuals and non-individuals (commercial entities).
When it comes to the cibil/credit score, it ranges between 300 to 900, which is basically gets generated after taking into account the credit history and repayment record as found in the CIR. And, many banks and NBFCs consider a score of 700/750 out of 900 a good score to avail a loan or credit card. Though, this range varies from lender to lender as with each lender the score may differ slightly. However, one thing that needs to be mentioned here is the fact that the more close your score to 900 is the better it is for you as far as availing a loan/credit card is concerned.
Well, it simply means that more money you can borrower from the lender and that too at an attractive interest rate, which will bring down your EMI and Interest Outgo burden. Now, if we talk about the credit card, a good credit score allows you to grab the best deal on your card, you can get special perks and offers such as an annual fee waiver or something.
Here’s How Your Score is Determined
- Do you regularly pay your credit card bills or dues on time or the monthly installments of your loan? If yes, you need not to worry. However,it would be a problem if you do not follow this thumb rule and let your score suffer.
- Next in line is the amount you owe to your lender/s and how that compares with the total credit available to you or the total loan amount you are looking for. Well, if your credit utilization ratio is higher, my friend it is a big time warning for you.
- Another crucial component that plays a crucial role is the length of your credit history. How long you have been in the financial journey and how long its been since you had any activity on those accounts. The fewer and older the account/s, the more it appeals to the lenders (assuming you have had timely payments).
- Recent inquiries on free credit score India check is another factor that contributes here. Your score will immediately drop if it looks like you are seeking plenty of new credit sources. It generates a negative image of yours in the eyes of lenders, which will ultimately be a big financial trouble for you in the future. Every inquiry you trigger within a short time span will affect your cibil score.
- The last point that gives its share in your score calculation is the type of credit you use. If you have an installment debt to pay such as a loan, where you pay a fixed amount each month-simply shows that you can easily pay the larger loan/s. But if you have a credit card, it is important for the lender to know how you are handling the revolving debt that tends to carry more burden since it’s seen as more predictive of the future behaviour (whether you pay the entire balance each month or just pay the minimum required amount).