A credit score is also known as a CIBIL Score, is a three-digit figure that shows how successfully you have managed credit in the past, such as a home loan, personal loan, or credit cards. It is basically a measure of your borrowing capacity, estimated based on your credit history.
Simply put, your credit score tells lenders if you are a reliable or hazardous borrower, as well as your likelihood of repaying a new loan responsibly. When you apply for a loan or a credit card, the lender bank or NBFC closely examines your credit score and credit history, which are kept on file in your credit report.
Your credit score is based on a scale of 900. The higher your credit score, the more probable it is that lenders will approve you for new credit. A credit score of 550 or higher is typically considered a normal benchmark and is favoured by lenders for any type of loan or credit card.
If you frequently fail to pay your loan EMIs or credit card bills on time, your credit score will suffer. Your credit score is likely to be good if you have been diligent with your EMI and credit card bill repayments and have not shown any credit hungry behaviour by often requesting for loans.
Credit Information Bureau (India) Limited (CIBIL) is a credit bureau that keeps track of and determines your credit score.
What is the significance of your credit score?
It assists a lender in determining whether you are a good candidate for lending money in the form of loans, credit cards, and so on. Your credit score will be important whether you apply for a personal loan, pay for urgent medical bills, arrange a family event, or assist loved ones. Your loan application may be denied if your credit score is poor. As a result, it is critical that you check your credit score before applying. At Bajaj Finserv, you may receive a personal loan with a variety of features and an inexpensive interest rate. Furthermore, you can return the loan with simple EMIs in a variety of ways. As a result, your credit score will remain healthy.
What are some of the elements that influence your credit score?
Your payment history is one of the most important aspects in determining your credit score. Other things that can have an impact on your credit score include:
Irresponsible payment habits, such as failing to pay loan EMIs and postponing credit card payments, might harm your credit score. If you exceed your credit limit by more than 30%, it can have a negative impact on your credit score.
Your credit score will suffer if you have outstanding debt and just pay the minimal amount due on your credit card. Finally, the length of your credit history influences how your credit score is interpreted.
How can you raise your credit score?
Here are some tips for keeping your credit score in good shape:
- Set up recurring reminders to pay your loan EMIs or credit card bills on schedule.
- Keep older credit cards to extend your credit history.
- Maintain a healthy utilisation ratio by exercising control over your credit consumption.
- Avoid taking on too much debt at once and pay off one loan before taking on another.
- Build your credit score by combining secured and unsecured loans.
How can I check my credit score online?
Bajaj Finserv offers a free credit score check online. The steps for checking your credit score are as follows:
- To obtain an online credit score as a new customer, provide your first and last name, date of birth, gender, email ID, PAN number, mobile number, address, state, city, and pin code.
- Find your credit score as an existing customer; you can also check your report online by supplying your registered mobile number. Check your online credit score with the OTP.
- Confirm that all your information is correct during the credit score check online process. Click the ‘Submit’ button. Bajaj Finserv offers a free online credit score and credit report.
Calculating your credit score
Credit bureaus compute an individual’s credit score by considering characteristics such as credit history, repayment behaviour, credit exposure, and credit type, among others.
Each credit agency calculates credit scores differently based on the criteria and method employed. All credit agencies, however, take the following variables into account:
- credit utilisation – The amount of approved debt contributes 30% to your score. Spending more than your wage or exceeding the monthly limit on a credit card might have a negative influence on your credit score.
- Payback History – 35% of your credit score is determined by your repayment history. Missing payments on a regular basis could lower your credit score.
- Credit checks – Your credit report is updated every time you apply for a loan. Taking out many loans in quick succession can harm your credit score. Similarly, every refusal appears on your credit record. As a result, it is best to apply for a loan only when you are confident that you will be able to repay it on time.
- Credit type and repayment period – The sort of loan you seek accounts for 10% of your overall score. You can keep a credit balance by applying for secured and unsecured loans. Similarly, repayment contributes 15% to your credit score.
