What is a good credit score to get a loan in India? – Times of India

by The Technical Blogs

Your credit score is one of the most important factors that determines whether you will get a loan approval or not. A good credit score is a reflection of financial stability, and it can pave the way for a smoother loan application process.

What is a credit score?

A credit score is a three-digit numerical expression that ranges between 300 and 900. It is calculated based on an in-depth analysis of your credit history and files.The credit score signifies your creditworthiness and plays an important role in assessing your ability to handle financial obligations responsibly.

What is a good credit score?

A good credit score typically falls within the range of 720 to 900. This score is determined based on your credit behavior and history. Having a good credit score offers several advantages, including quick loan approvals, lower interest rates, and access to higher loan amounts.

  • Below 600 (Poor): Credit score in this range is unacceptable representing that you are a high risk borrower for banks and financial institutions.
  • 600 – 699 (Fair): This credit score range indicates that you have late or irregular loan or credit card bill payment behaviour.
  • 700 – 799 (Good): This credit score implies that you have a responsible loan repayment background and credit behaviour.
  • 800 and above (Excellent): The credit score in this range reflects high and reliable creditworthiness and is considered the best credit score range.

Why is a good credit score important?

A high credit score signifies financial stability, making lenders more willing to trust you with timely loan repayments. This can result in lower interest rates and faster approval times, leading to potential savings and increased confidence when applying for personal loans.

Factors affecting your credit score

Here are some of the important factors that affect your credit score:

  • Late payment: Even a single late payment can negatively impact your credit score. It’s essential to pay your bills and EMIs on time to avoid this issue.
  • High utilization of credit limit: Using more than 50% of your credit limit consistently can affect your credit score. Aim to keep your credit utilization ratio below 30% to maintain a good score.
  • Multiple loans: Pursuing multiple loans from different lenders can lower your credit score. Each loan application results in a hard inquiry, which negatively impacts your score. It’s essential to be mindful of your credit score before applying for loans.

How to improve your credit score

If your credit score is not where you want it to be, you can take steps to improve it. Here’s what you can do:

  • Pay your utility bills, credit dues, and EMIs on time.
  • Keep your credit utilization score below 30%.
  • Avoid applying for multiple credit cards simultaneously.
  • Diversify your credit types.
  • Increase your credit limit.
  • Maintain a history of good loan practices on your credit report.
  • Minimize risk and increase reliability in your financial practices.
  • Limit the number of hard inquiries on your credit report.

Credit Score FAQs

  1. What is a credit score, and why is it important?
    A credit score is a three-digit number that represents your creditworthiness. It ranges from 300 to 900 and is used by financial institutions to assess your ability to manage financial obligations responsibly. A good credit score improves your chances of loan approval and at best interest rates.
  2. What is considered a good credit score for securing loans?
    A good credit score falls in the range of 720 to 900. Individuals with credit score in this range get quick loan approvals, lower interest rates, and access to higher loan amounts.
  3. What information is included in a credit report?
    A credit report includes information such as – credit score, credit summary, personal information, financial status, and credit history of inquiries.
  4. What factors can negatively affect your credit score?
    Factors including late payments, high utilization of credit limit (above 50%), and applying for multiple loans from different lenders may impact your credit score.
  5. How to improve credit score if it’s low?
    You should pay your EMIs and bills on time, maintain a low credit utilization, avoid applying for multiple credit cards or loans, and limit the number of hard inquiries on your credit report.

Source link

Related Posts

Leave a Comment


Copyright @2020  All Right Reserved – Designed and Developed by DSF SEO COMPANY