A credit score is based on the analysis of a person’s creditworthiness which is derived from a credit report. It is a numerical expression based on the information gained from the credit bureau.
Credit scores are used by the Credit Card companies, banks and other potential lenders as well. They perform a lender’s role and before lending money to the borrower they use this credit score to find out the risk of facing a Bad Debt in future.
These scores tell the lender whether the borrower will be able to pay the money back on time or not. And also if the borrower will bring good revenue to the organisation or not. This also plays a critical role in determining the credit amount, it’s time period, interest etc that would be sanctioned to the borrower as a loan.
How to check credit score and know if it is good or not?
Usually, credit scores vary from 300-850. And a credit score ranging between 550-700 is said to be a fair score. But a score lying between 700-900 is considered the best. The math is pretty simple. Greater the credit score, greater the creditworthiness. Hence, a higher chance to get the loan.
There are three top credit bureaus that are used to check the credit score; Experian, TransUnion CIBIL and Equifax. In India, TransUnion CIBIL is the most popular one. You can get your credit score by visiting their website and you will be required to pay a prescribed amount. This fee differs with every bureau. But as per the guidelines given by RBI, you can get a free credit report and score between January-December. Although, only once in a year you can get this free report.
Ways to maintain a good Credit Score
It is very important to have a good credit score in order to increase the chances to get a loan from the lender. Here are some best ways you can use for maintaining a good credit score.
1. Maintaining Credit Discipline
Credit Repayment must be exercised in a disciplined manner. So you must pay your Credit card bills and EMIs on time. To meet the deadlines and maintain credit disciplines you can set reminders or set a system where your bills are automatically paid on the due date.
2. A good history
A borrower who always pays his credit bills on time will always have an increased advantage compared to the person who has not taken any credit before and has no credit score to show. Create a good credit history by exhibiting a good record of clearing dues and credit repayments which can include long and short term loans.
3. Joint Accounts
It doesn’t matter whether the account is a joint account, it is still important to exercise a disciplinary way to make the repayments and pay the EMIs. Both the account holders equally share the responsibility to make the repayment on the specified time. Having another member’s presence in the account cannot be used as an excuse for the delayed due payments. This will affect your account holder’s credit score.