WHAT IS CREDIT SCORE?
Credit Score is a three-digit number that will decide your worth for a future loan or credit card. It is calculated by banks, credit card companies, insurance and other organizations to know your credit capabilities. Your credit score may affect the interest rate paid on the loan or credit card in the future as the good credit score will have a lesser interest rate. The score ranges from 300 to 900 as 900 will be counted as the best score.
Many countries including Australia, United States, China and India measured the borrower’s ability to have credit facilities through credit score. In India, there are four major companies licensed by Reserve Bank of India to check the credit information.
The first credit company established was Credit Information Bureau India Limited (CIBIL) in 2001 and the other three, Equifax, Highmark and Experian was opened later on in 2010.
CIBIL score takes time of almost 18 to 36 months and more to build up a score while the CIBIL score of less than six months will be counted as 0 and if there is no credit history, it will be considered as -1.
An individual having the credit score between 740 to 900 is seen as exceptional and very good score as it includes no late payment history and low balances on credit cards. They have a high chance of getting low interest on credits because of the low risk in the future.
Borrowers with the credit history of between 580 to 739 are considered as fair and good score as they have less defaults in their credit history and have the chance of getting credit facilities at the competitive interest rate.
Having a credit score of below 580 is a poor score and have damaged credit history with no time repayment and other multiple defaults. They have the least chance to get the new credit facilities and need to repair their creditworthiness.
The credit score below 350 will be labelled as no Credit or bottom line score as they don’t have any credit history. They need to buy a loan or credit card and work accordingly to create a good credit score.
So, try to maintain a good credit history to get the least interest rate loan or more credit limits anytime you want it in future.