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Have you ever come across someone telling you to ‘Keep your credit scores as high as possible’ or ‘Keep your credit scores good’? Have you ever wondered what that means?
A numerical expression which is based upon the level of analysis subjected to a person’s credit files is what is meant by the credit score. This is the reference metric for measuring the creditworthiness of a person and financial lenders take into consideration this score to determine whether a person is qualifying for a loan and what the interest rate for that particular loan applied would be. The prominent Credit bureaus in India are CIBIL, CRIF, Experian, and Equifax.
A good credit score can be categorized as follows:
CIBIL is one of the prominent credit bureaus in India and this score is mostly considered by financial institutions while offering a loan to a concerned individual. The CIBIL score ranges between 300 to 900, and this is a measure of how worthy a person is credit-wise.
CRIF or better known as CRIF High Mark Credit Information Services Pvt. Ltd. is a credit bureau approved by RBI which serves the retail, rural, agriculture, MSME, commercial and microfinance sector. The score ranges between 300-900, and a score over 700 is considered good.
Another commonly used credit score by lenders is that of Vantage Score which was developed by three top credit bureaus which included Experian, Equifax and TransUnion. This model has a range of 300 to 850 and according to the Vantage score, any score above 660 is considered good.
Lenders take credit scores into the decision making process while providing loans to different customers and this also helps in assessment of the risk factor for the repayment of the loan. Having a good credit score is important because this is a prime determining factor of whether a person qualifies for the loan and also the rate of interest of the loan applied has a dependency on the credit score. You can very well compare your credit scores to that of a report card because just like how good your grades were showed how academically good you were, your credit scores show how able you were of repayment of your previous loans.
Now you must be wondering why it is so important to keep the credit scores good. If yes then the following points are just the thing that you should read now.
Every individual has need for money and this is why they either work for someone or run a business to make money out of it. A salaried person has a fixed income to spend and may require a loan to fulfill any luxurious need or in case of any severe emergency. In case of a businessman, the need for the loan may be to set up the business, or to support the business with additional money in times of any financial crisis or when the business is undergoing any losses or for that matter, the expansion of the existing business.If your credit score is found to be good then it becomes a cakewalk for you the next time you apply for a credit card or any kind of loan. Having a good credit score is like being more confident while applying for the next loan or credit card.
If you have been consistently keeping your credit scores good then you will be successfully able to qualify for low interest rates while using credit cards and applying for loans. This means that indirectly you will be able to pay off your debts faster while having the capability of saving as well.
Once a person has availed a particular loan, it may so happen that he requires more amount that what he had actually calculated in the beginning and applied the loan for accordingly. On the borrower’s part, keeping a good credit score comes as a boon, because this helps the person to apply for a higher amount of loan than the last one or extend the limit of the already existing one.
So, after reading all this, don’t you think that it’s definitely a good idea to always keep your credit scores good, so that you can enjoy the boons that come along with it.