A strong score is just a numerical representation of your credibility. This credit score is decided by a wide range of parameters involving your payment history, debt amount, and credit history length. A strong score is usually factored in to be anything that is over 750. This article clearly explains the importance of holding a strong credit score and how it can impact your potential to avail funds and get access to credit. Holding a strong score can even save you a lot of funds on the rate of interest and make it simpler to get approval for credit cards and loans.
What is a strong credit score?
A credit score between 750 and 900 is looked upon as excellent. A strong credit score can assist banks and various other financial institutions to determine whether to provide funds to you as a borrower. A low score, in contrast, can prevent you as a borrower from accessing various credit-linked benefits and opportunities. For instance, for availing a personal loan, checking your personal loan CIBIL score is a must, particularly if you are applying with a public sector bank, like SBI, then SBI personal loan CIBIL score analysis is a must. Doing so, allows you to understand if you are eligible for the loan.
The below table outlines the implication of distinct credit score for you as a borrower, offering insights into your score health and if you need to take any measures to improve the score –
|Credit score||The health of credit score|
|Between 300 and 549||Chances of turning into a defaulter
Offers information on missed or late credit payments. This reveals a high reliance on credit.
Low credit score
Show irregular behaviour of payment
|Between 550 and 649||Shows your multiple direct inquiry attempts
Shows your undisciplined credit payment behaviour
Fair credit score
|Between 650 and 749||A reasonable rate of interest is levied against the loan, but you as a borrower will not receive a higher credit card limit
Low risk of becoming a defaulter
Eligible for loans and credit
Shows your responsible behaviour when it is about loan or credit EMI repayment
Good credit score
|Between 750 and 900||Higher negotiation power
Lower interest rate
Error-free credit report
Shows zero default payments
Highlights disciplined credit repayment behaviour
No to little chance of turning into a defaulter
Excellent credit score
Borrowers with a good credit score in the excellent range have access to the best credit terms and products while those with low or poor scores might witness challenges in availing a credit or might be offered credit with extremely less favourable terms.
Also Check: SBI Personal Loan CIBIL Score
Top parameters that impact credit score –
There are various parameters that impact your credit score as a borrower, however, it is your responsibility of you as a borrower to work constantly to ameliorate it. The following are a major parameters that impacts credit score, and, in the case, it is left unresolved, then it tends to turn into a hindrance in the credit card or loan approval process –
- Multiple partially settled payments
- Outstanding balance
- Error, issues, or comments in your credit report
- Various multiple direct hard inquiries within a specific time period
How to ameliorate credit score?
To improve your score, you must be responsible and strict regarding credit repayments. A few steps you can take for maintaining as well as regaining a strong score are –
- Ensure to make an on-time credit repayment to avoid levying any late charges and fees and damage to your score.
- Use CUR (credit utilisation ratio) well to avoid maxing out the limits on your credit cards.
- Avoid making multiple direct and hard inquiries, which may negatively impact your score.
- Maintain a mixed balance of unsecured and secured loans to display lenders that you simply can manage distinct kinds of credit.
- Resolve any issues, errors, or comments on your report to make sure your score accurately shows your credibility.
- Take comments linked with your report very seriously and address the issue or problem very promptly.
- Avoid any partially settled payments because this can show financial troubles and massive damage to your score.
- Do not leave any outstanding balance on credit cards as this may enhance your credit utilisation ratio, which may damage your score.
- Ensure to set reminders for yourself to ensure you make your payments on time.
- Determine the credit amount you require and the number of expenditures that you can easily avoid taking on debt than can handle.
There are a few of the ways you as a borrower can better maintain as well as regain a strong credit score. Moreover, it is advised that your credit report must be reviewed thoroughly, and at least twice a year to understand where you stand credit-wise.
Frequently asked questions (FAQs)
What’s the significance of using a credit score?
A credit score is nothing but a numerical representation of your credibility and is utilised by lenders to understand how likely you are as a person may repay the loan timely. As such, your credit score is usually viewed as the main determining parameter in loan application approval.
What’s an excellent score?
A score that ranges anywhere between 750 and 900 is looked at as excellent. An excellent score shows your responsible behaviour when it is about making credit or loan amount repayment.
How long it takes to ameliorate your score?
Improving your score can take a little time as it requires constant demonstrating disciplined credit behaviour over a time of various months and even years.
How does the credit card balance impact your score?
An outstanding credit card balance reduces your score because it shows your inability to make credit amount repayment on time.
What is a bad score?
A bad score is usually looked upon as a score, which is below 600 while the exact definition might differ based on the lender and credit type you avail.
What’s a fair score?
A fair score is usually looked upon as a credit score that ranges anywhere between 600 and 700. This scoring range is looked upon as fair as it is not very high as a good score and not very low as a poor score.
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