You are currently viewing Credit Score – Your Financial Reputation

After months of house hunting, Ajay and Priyanka found their dream house. They confidently approached their bank for a home loan as both of them are earning well. But they are in for an unpleasant surprise: the bank rejects their loan request as Ajay has a poor credit score.

Credit Score – What on earth is that?

Ever thought of owning a house or a car or buying an expensive electronic product on EMI? If the answer to any of these is yes, then you might have also thought of availing a loan or getting a credit card to meet your financing needs.

A credit score is essentially a three digit number derived from an analysis of your credit files. In other words, your credit score is a reflection of your creditworthiness so the score is a parameter to determine the likelihood of you repaying a debt, in full.

Why is it important?

Besides your age, income and other factors, the credit score is another important criterion that will determine your eligibility for a loan or a credit card. A score of 750 or above is considered to be good.

You are entitled to the following, if you have a good Credit Score:

1. Easy credit from lenders

2. Quick approval of loans

3. Loans at lower rates interest

Since 2017, some lenders have been offering lower interest rates to people with higher credit scores. A reduction of just 1% on the interest rate on a 15 year home loan could mean paying one year less of EMIs!

In the near future, your Credit Score could impact your employment prospects as well.

How to improve your Credit Score?

For starters, make timely payments a habit. Ensure you pay all EMIs and credit card bills on time.

The next important point is to know your credit limits. Limiting credit utilization to 30% of the total credit limit helps build your credit profile.

Maintaining a balance of secured (such as home and car loans) and unsecured loans (personal loans and credit cards) is viewed positively as well.

How can you check your credit score? Are Credit Reports available for free?

In India, credit scores are generated by credit bureaus. Get free access to your credit score and report through any of the four credit bureaus:

1. Transunion CIBIL

2. Equifax

3. Experian

4. CRIF Highmark

Note – A complimentary credit report may be obtained for free once annually from every credit reporting agency.

Given the importance your credit score and report hold in your life, it’s hugely important to monitor them regularly. Ensuring the accuracy of the financial reputation you have built with years of effort is crucial – it will affect your ability to access credit in the future, and at what cost. For now, it’s free to check your score and report, why don’t you?

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