All Things You Need To Know About Credit Score

Posted on by

According to Livemint, in India, only 70 million out of 220 million eligible candidates are credit-active. Most individuals refrain from utilizing such credits due to a lack of understanding about how they work. That is why it is imperative to learn more about your credit score to enjoy maximum benefits from it. Also, knowing how to improve credit score can help you to avail of advances in the future much more easily.

What is a Credit Score?

Your credit or CIBIL score is a record of your credit history and is computed as a 3-digit score between 300 and 900. It is used by financial institutions to determine your creditworthiness.

Your CIBIL score is a crucial parameter that can determine your eligibility to avail an advance. Lenders use it to check how risky or dependable you are as a borrower. That is why it becomes extremely important when you want to avail unsecured and collateral-free loans from financial institutions. Hence, if you have low credit score, it is necessary to know how to increase CIBIL score to get instant and easily approval on the loan. 

A score of above 700 is generally considered to be a good credit score.

What Are The Different Sections In Your Cibil Report?

The most important sections in your CIBIL report which influence your score are –

  • Your credit summary.
  • The history of your account.
  • Credit enquiries.
  • Your public records.

What Are The Factors That Affect Your Cibil Score?

Before learning how to improve credit score, you should know the factors that can affect the score –

  • Your repayment history

About 35% of your credit score depends on your payment history. Your repayment history helps the lender to determine your ability to bear a debt burden. Therefore, it is crucial to make timely payments and avoid any defaults with your loan and credit repayments. Any missed payment can affect your credit score negatively. There are ways to effectively repay your existing loan that can help you to make payments on time.

  • The amount of credit you avail

If you avail too much credit, it can reflect negatively on your credit score. A credit utilisation ratio is the amount of credit you avail compared to your credit limit. A high credit utilisation ratio implies that you are too dependent on such debts and are thereby credit-hungry.

  • The age of your credit history

The age of your credit history is the total sum record of financial transactions you have made. It includes all the payments you have successfully made as well as all those you were unable to make. Borrowers with a long credit history with none or minimal defaults are considered over those with a short history with just as similar ratio of issues.

  • Credit types you avail

Mixing various types of credits can reflect well on your credit report. If you avail any one type of credit, it means that you are reliant on that particular type of credit for all your purchases. It can affect your credit score negatively.

Can you avail a loan with a low CIBIL score?

If you are wondering “how can I borrow money with bad credit,” there are a few ways you can implement while availing advances. These are –

  • Apply for a secured loan

When you apply for a secured loan, you avail the advance against collateral. For instance, when you avail a loan against property from leading lenders, you avail the credits by mortgaging your property. In this case, your credit score might not matter much as it is a loan for low CIBIL score.

There are different types of loan against property which you can avail to meet various financial needs. Leading lenders such as Bajaj Finserv offer numerous repayment-friendly features with such loans.

Bajaj Finserv also provides pre-approved offers that can make availing loans faster and easier. These offers are available on several financial products, including secured credits like home loans and unsecured credits like business loans, personal loans, etc. You can check your pre-approved offer by providing details like your name and phone number.

  • Apply with a co-signer

Having a co-borrower for your loan can help you to distribute the loan repayment responsibility. If your co-signer has good credit score, the financial institution might approve your loan more easily.

  • Increase your credit score

There are many answers to the question of how to improve credit score. Some of them include –

  • Make timely payments.
  • Pay off your debts.
  • Monitor your credit score.
  • Avoid using too much credit to make purchases.

These are a few answers on how to increase CIBIL score. However, you must always try and maintain a good credit score from the very onset of the time from which you start availing credits.