Why is Credit Score important to you?
A good credit score is one of the most important eligibility criteria that you should fulfil to acquire a bank loan or a credit solution. Credit Information Companies (CICs) like Experian and Highmark are among the premier agencies in India that provide the credit score on all borrowers to financial institutions. This information is collated into a report called Credit Information Report (CIR), which is in turn shared with all the banks and financial institutions when requested.
When you apply for a loan or a credit card, the bank gets your CIR from CIC to access your credit history and credit worthiness before approving your loan or a credit solution.
Your credit score!
It is a three-digit numeric summary of your entire credit history derived from your Credit Information Report (CIR). The credit score normally ranges between 300 and 900. A higher score indicates a less risky borrower and increases your chances of getting a loan approved.
How are credit scores calculated?
Credit scores are calculated based on various factors such as your payment history of loans and credit cards, number and type of loan and credit card accounts, length of your credit history, outstanding debt and many other factors.
Why are credit scores important?
When you apply for a home loan or credit card at a bank or a financial institution, the lender checks your credit score first to determine if you are eligible to avail the loan. Your credit score acts as the first impression for the lender, the higher the score, the better the chances are of the loan/credit card being approved. Having a low score is not a good situation to be in since it places you in a risk zone and makes it difficult for you to get a loan approved.
Where does the credit score have influence?
“Are you a reliable candidate who will pay back what you are going to borrow?” is the first thing the lenders would want to know. With your score and your CIR, the banks will be able to easily access your credit worthiness and can approve or deny your application.
Approval for housing loan
A good credit score will ensure that you get approved for a new housing loan. A good credit score can help you acquire a loan of up to 85% of the total cost of the property.
Credit scores not only affect your ability to get favourable loans and good interest rates but they will also help you in getting approved for a new cell phone plan or insurance cover with lesser premiums.
Where credit scores don’t have influence?
When you have never used any credit instrument like a credit card or have never taken a loan of any kind, you have no credit and repayment history. In such a case, you will get an NA score. If you belong to this category, you can look for agencies specialising in credit profiling first time borrowers.
Credit scores play a pivotal role in your financial journey. Responsible use of credit, making payments on time and having an optimum number of loans and credit cards will ensure a good credit score, thus, ensuring a smooth financial journey.