How to Improve Your Credit Score Fast -Tips to Follow
What is a credit score?
A credit score is a three-digit number that usually ranges between 300 to 850. It is designed to show the credit risk. As much as higher the score, an applicant has the ability to potential banks or lenders. It is based on the credit history such as total levels of debt, repayment history, number of open accounts, and other factors.
The credit score is commonly known as CIBIL Score (Credit Information Bureau India Ltd.). It is the primary organization for issuing a credit report and scores related to an individual. The financial data of a credit score of an individual i.e., information of credit card and loan from the best financial institutions, banks, or NBFCs in India. Such data are expressed in the form of a Credit Information Report (CIR) or CIBIL credit report.
Factors affecting CIBIL Score:
There are many factors when evaluating a credit score:
- Type of credits: - There are three types of credit such as open credit, Installment, and revolving credit. Credit allows people to buy goods and services with the borrowed amount.
- Length of credit history: - The duration of the credit history is the time which is given to an applicant by the lender to repay the amount of the product that an applicant has taken from the lender.
- Errors in a credit report: - Errors in the credit report is common circumstance such as wrong personal information which has a negative effect on CIBIL Score.
- Payment history: - An applicant has to make monthly credit card bill payments and Equated Monthly Installment (EMI) on time. Delay in payment can lead to bad payment history and also affect the CIBIL Score.
- Credit Mix: - Credit mix also affects the credit score in contrast to the portfolio for the loan. The portfolio involves unsecured credit lines in case of your name and the number of secured loans.
How to Improve Credit Score?
- Track your CIBIL report: - Credit score might have made an error of not updating an existing loan that has already been paid which somewhere affects the credit score. So, to avoid errors keep on tracking your credit reports.
- Payback all debts on time: - Repayment of all the debts and loans on time is the major benefit for those who want to render themselves a creditworthy individual and responsible. This is the factor on which lenders have to decide whether to approve the amount of loan and at what interest rate.
- Go for long-term loans: - Make sure that you have to pay back the amount as soon as possible to make it durable, Ans if you are unclear then go for the longer repayment period and it makes your monthly installment low and easy to pay back without any difficulty.
- As old as the credit card, the more valuable the credit score is: - To maintain a positive credit history, a credit card is a way for a lender to decide whether you are applicable or not for the loan.
Ranges of CIBIL Score
The range of CIBIL Score can be between 300 to 900. For the approval of the loan, the Credit score must be above 750 in your credit report.
Breaking down of ranges for credit score:
- 800 – 850: Excellent (Appropriate for high approval and at a lower rate of interest)
- 740 – 799: Very Good (Acceptable for the better interest rate)
- 670 – 739: Good (Approval for credit is possible but limited)
- 580 – 669: Fair (Difficulty in credit card approval and at a higher rate of interest)
- 300 – 579: Poor (Chances are very less for the approval)
Why do Banks check the credit score before applying for a loan?
Credit score evaluates complete creditworthiness. Given below are the reasons for reviewing the credit score- To:
- Check the record and the credit history.
- Whether you are suitable for paying back debts.
- Determine the loan amount to allow you and the applicable interest rate.
- Audit your credit balance and recognize the risk level of the profile.
- Check whether you qualify or not for the loan.
Hence, knowing the facts about Credit score financeseva allows you to choose the best deals.
Also read: - Top 5 benefits of having a credit score above 750.
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