INTRODUCTION
A lot of people get questions such as What is a credit score? What is a cibil score? How to increase your credit score fast? In this article, you would find answers to these questions and would get to know what is a good credit score and what is a bad credit score and how to check a credit score.
Table of Contents
WHAT IS A CREDIT SCORE?
A Credit/Fico score or a credit report is a three-digit number that show's an individual's creditworthiness, which indicates how likely they are to repay borrowed money or fulfill financial obligations. You should maintain a credit score for a mortgage, car loan, or any other type of loan. An average credit score is between 500-649.
A credit score is a tool used by lenders, such as banks and credit card companies, to assess the risk of lending money to a person.
A good credit score will increase the chances of the individual getting a loan from the bank. If the credit score is bad it shows that the person might not be able to repay the loan and hence decreases the chance of getting a loan.
WHAT IS A CIBIL SCORE?
CIBIL or Credit Information Bureau (India) Limited is India's first credit information firm. It is a firm that collects various financial information about the person and gives a credit score named as cibil score. It is the most widely used credit score in India.
A credit score is also a three-digit number released by a financial agency named CIBIL that ensures the creditworthiness of the person and ensures its ability to repay the given loan such as a car loan, home loan, mortgage, or any other loan.
It can be considered as a credit score given by CIBIL.
How can I check my credit score?
A good credit score should be maintained in order for your low-interest rates on loans and higher chances of getting a loan. For this, we need to check whether our financial activities are suitable and whether our credit score is on the right path.
You can check your credit score very easily for free on many websites available on the internet. You can check your credit/cibil score by using the Paisabazaar credit score checker for free on the Paisabazaar website.
You have to give your Gender, Full Name, Date of Birth(Dob), Pin Code, PAN, Email Address, and Mobile Number and then click on the GET FREE CREDIT REPORT button.
A lot of people think that checking their credit score affects their credit score but this isn't the case. If you check your credit score that is considered a soft inquiry but if a lender checks your credit score it is considered as a hard inquiry.
Yes, hard inquiries do affect your credit score but soft inquiries don't.
How Is Credit Score Calculated?
A credit score is calculated by considering various aspects such as:-
- Loan Repayment History: Timely payment on any previous loan would create a good impact on your credit score as it ensures that you are a genuine person. Late-paying loan EMIs will give you a low credit score as it decreases your creditworthiness.
- Duration of loan: If you have taken a loan for a high duration but have made a consistent EMI repayment then it would create a slight impact on your credit score.
- Number of credits: Every time you apply for a new credit (loan) it makes a new entry. A higher number of these may negatively affect your credit score as it shows that you are too credit hungry.
- Credit Utilization: If you spend the total of the credit limit allowed by your bank it will negatively affect your credit score. But if you spend around 30%-50% of the total limit it will positively make an impact on your credit score.
WHAT IS A GOOD CREDIT SCORE/RATING?
A credit score generally lies between 300-900. But if we knew what a good credit score is we could know what our credit score goal should be.
A credit score between 650-699 is considered to be a fair credit score. With this credit score, the chances of getting a loan become possible.
Any score above 699 is a good credit score. If you go to a bank with this credit score for a loan then the chances of getting a loan is comparatively higher.
BAD CREDIT SCORE
A bad credit score lies below 500. If you're having a credit score below 500 then the chances of getting a loan would be a difficult task. In this case, however, you can try to get a security loan.
A bad credit/cibil score can mess up your financial life as your credit card limit might decrease or you would get loans with high-interest rates.
HOW TO IMPROVE YOUR CREDIT SCORE FAST?
- Pay your credits on time: If you have an ongoing loan or you're using a credit card, then you should set appropriate reminders for your repayment dates and pay them on or before time.
- Optimize your credit card usage: Suppose you have a credit card limit of 100,000. Then you should only use 30,000-50,000, which will result in an increase in your credit score fast but if you use your credit limit 100%, then your credit score might have a negative impact.
- Go for long-duration loans: If you have a longer duration of your loan and if you pay all the EMIs on time then it shows that you are trustworthy and could pay the loan back without defaulting. And hence it will increase your credit score.
- Don't take too many loans at once: If you opt for too many loans altogether, it shows that you don't have much money left and can be bankrupt which in turn decreases your credit score. But on the other hand, if you take one loan at a time and repay it and then take another loan and again repay it, it will boost your credit score.
- Check for credit score errors: Sometimes errors occur on credit reports which can drastically change your credit score. So you should check your credit score after a certain time so that you can analyze and rectify the errors and can take some actions for correcting them.
CONCLUSION:
A credit score is a three-digit numerical value that ensures a person's creditworthiness. A cibil score is a credit score given by an entity named CIBIL. You can check your credit score for free on various sites. A good and bad credit score will impact and decide whether or not you will get a loan.
There are various ways by which you can increase your credit score such as following some simple rules of spending money and also managing money. For this you should also have knowledge about personal finance, about which you can In this article: PERSONAL FINANCE