5 Smart Things To Know About Credit Score - Loan Trivia

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Monday, 14 December 2020

5 Smart Things To Know About Credit Score

 


As credit consciousness increases among Indians, a higher number of individuals are opting for loans to

fund various pursuits. Today, it has become almost impossible for one to avail credit without

understanding the relevance of credit scores. Therefore, here are five of the integral aspects a potential

borrower must know about a CIBIL health report – 

  1. Indicates creditworthiness of a borrower

Lenders often face considerable risk of delinquencies when extending unsecured loans. Since there is no

collateral involved with such forms of credit, NBFCs must rely on the credit history of a borrower to

ascertain whether he/she poses a risk of non-repayment. Your credit score helps lending institutions

make such distinctions.

  1. CIBIL is the most widely referred scale

Credit Information Companies or CICs are responsible for maintaining credit scores for every

individual. The Credit Information Bureau (India) Limited or CIBIL is the most widely used CIC when

it comes to calculating one’s creditworthiness. Most lenders refer to the CIBIL analysis report before

approving or rejecting loan applications.

  1. 750 or more is the ideal credit score

While some lenders may provide loans to individuals with lower ratings, 750 is considered the minimum

score to avail credit from reputed financial institutions. Individuals with insufficient scores can still avail

certain loans but at higher interest rates.

Contrarily, borrowers who have an even more impressive credit profile can negotiate terms with lenders

and acquire the best offers.

  1. Some individuals may not even have a credit score

If you have never borrowed credit from financial institutions in India, it is likely that you do not possess

a CIBIL score at all. In such a case, you must first build a credit portfolio before you can avail

mainstream consumer loans, such as a personal loan.

  1. Using a credit card responsibly can help build this score

Credit card users, who spend using the card and repay the entire outstanding sum after each billing cycle,

generally possess a positive credit rating. However, if one chooses to pay only the minimum amount

every month, his/her scores will falter eventually.

It is recommended for individuals to maintain a healthy credit score to boost their chances of availing

credits at favourable terms without hassle.

Must Read: These Things You Must Know About Credit Score

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