What is Credit Score and Why it’s Important to have Proper Knowledge about it? Credit score - It’s a term that you must often hear in the conversations around you but have you ever thought about how much you exactly know about it? When you will ask about it, you will get to know that not a lot of people know what it is exactly. But worry not, because today, we will be telling you everything about the credit score and many other things related to it such as how it is calculated, what’s the importance of having a good credit score, and the CIBIL report. What is the meaning of the Credit Score? Credit score is nothing but a 3-digit mathematical representation of your creditworthiness and financial behavior. It shows how well you handle your debt repayment. Your credit score is generated from your credit report also known as the CIBIL report. In our country, an individual’s credit score ranges from 300 to 900. This three-digit number determines your creditworthiness. Any score above 700 is considered to be a good credit score for all the lenders in India and it also shows your brilliant debt repayment behavior. 300 is the worst credit score someone can have, and 900 is the best. An individual with a low credit score is considered to be financially irresponsible and lenders usually find them untrustworthy while sanctioning the loan amount. What is the process of Credit Score Calculation in India? As we have told you before that credit score is calculated from the credit report which contains the detailed record of all your credit history such as personal details (name, address, date of birth etc), contact details, information about your employment, inquiry information, credit card information, loan account, etc. These credit reports are generally managed by credit bureaus in India of which the main four bureaus are Experian, Equifax, CRIF High Mark, and CIBIL (Credit Information Bureau of India Limited). CIBIL was the first bureau to be set in India. These all credit bureaus are approved by RBI (Reserve Bank of India) - the apex bank of India. CIBIL is the leading credit agency of India, that’s why a credit score is also popularly known as CIBIL score and a credit report is also known as CIBIL report. What is the importance of having a good credit score? A good credit score opens the door to many amazing ventures of which you can take the benefits. Here are some of those mentioned below. Easy Loan Approval and Quick Disbursal: H aving a good credit score lets the lenders trust your creditworthiness and thus, the time taken in loan approval and disbursal is much lesser. Lenders know that a person with good repayment behavior will repay the loan amount responsibly, hence they take less time in loan disbursal. Lower Interest Rates: A person with a good credit score is more likely to get low-interest rates in any kind of loan facility as compared to an individual having a normal or bad credit score. The chances of an individual’s loan application being rejected are also high because of the bad credit score. To compensate for the bad credit score, the lender charges a hefty interest rate from them.
Higher Borrowing Capacity: L enders tend to lend a large amount of money to individuals with high credit scores as they are more likely to repay it back on time. You will also get exciting offers and privileges on your credit card on having a good credit score.