A credit score is very essential for anyone willing to take a loan at some point in their lifetime. It is a three-digit score that determines the ability of an individual to repay a loan. It takes into consideration the credit behavior of an individual including timely repayment of EMI, credit card bills payment and other credit-related information. Based on your credit activity, the credit Bureaus assign a score that is acceptable across the financial Institutions. whenever you apply for a loan or plan to take a credit card this credit score acts as identification of creditworthiness. A financial institution will look at the higher credit score for approval of loans quickly and higher amounts for loan approvals. Thus maintaining a good credit score is very important if you are planning to take alone can apply for a credit card in your future.
There are four credit bureaus in India that provide credit scores to individuals in the country. A credit score ranges from 300 to 900. According to the credit bureaus, an individual should be looking at keeping their score as close to 900 as possible for a healthy credit report. A loan application with a high credit score is more likely to be approved by most Financial Institutions.
A poor credit score shows that you are irresponsible in repayment of your debt or financially unstable to honor a loan. Every lender will check your credit score before improving your loan application or providing you with a credit card. The credit bureaus take into account your past activities such as Length of your loan tenure, repayment history, loan inquiries, etc. Thus, your credit score is the identification of your spending habits and your creditworthiness. Every lender be it a bank or Non-Banking Finance Companies (NBFCs) will look into a Credit score before granting a loan. Even a single delayed payment of EMI or failing to pay your credit card bills on time can affect your credit score adversely.
Credit Information Companies in India
Credit information companies or credit bureaus are the organizations that are responsible for generating credit information reports about individuals in India. There are four leading companies acting as the head of the credit information system in India. These companies are licensed by RBI and given the power to maintain credit history reports of every eligible individual in the country.
- CRIF Highmark
These four organizations are responsible for providing credit reports to banks and non-banking financial companies before lending a loan or giving out credit cards to individuals in the country. These organizations collect, monitor and maintain reports of every eligible individual regarding their spending habits and credit history. Based on the collected data they assign a three-digit score to the individuals regarding their creditworthiness and ability to repay a loan. Your credit score shows your ability to repay a loan within an agreed tenure without being a defaulter. Every lender is legally bound to share the credit details of customers with this regulatory organization. They are instructed to send in loan history and other credit-related information of individuals periodically to the credit information companies so as to maintain an updated credit history. A credit score is similar for every credit information companies thus credit score for from any of the four companies is valid across all banking and Non-Banking Finance Companies.
Transunion CIBIL or simply called as CIBIL is one of the leading credit information companies in India. It is the first credit rating agency formed in 2000 to keep track of the credit histories of individuals and companies in India. It is one of the most popular Agencies providing credit reports to banks and non-banking finance company is for lending a loan to individuals in the country. CIBIL has one of the largest customer bases in the country with over 700 million trades across three divisions. The credit report generated by CIBIL is known as the CIBIL score which is accepted across all lending institutions in India. You are more likely to hear about the CIBIL score while applying for a loan online or through any bank. A CIBIL score close or above 700 is considered ideal for taking a loan.
Experian is among the top credit information companies in India providing credit reports to banks and non-banking finance companies to judge the creditworthiness of an individual or a company. It was established in 2006 however it started its operations since 2010 after being licensed by RBI. An individual can get an Experian credit information report to determine his/ her credit score for being eligible for a loan. Experian also provides credit reports for companies based on which lenders can grant a loan to a company. It gives a credit rating from 300 900 to determine the creditworthiness of an individual or a company. It is cheaper to get a credit report from experience compared to other agencies. However, the score provided by Experian is accepted across all financial and non-banking financial companies similar to any other CIC.
Similar to CIBIL, Equifax is another credit information company that provides credit scores to individuals and companies based on their credit history. it started its operations in 2010 after being licensed by RBI. It has its headquarters in the USA and it is one of the leading credit bureaus in the United States. It provides credit reports to banks and Non-Banking Finance Companies about an individual or company presenting their creditworthiness. Based on the credit report from Equifax a loan or credit card can be granted to an individual or a company.
Highmark is another popular credit Bureau in India that maintains credit scores of individuals and companies to help lenders decide the creditworthiness before granting a loan. It was founded in 2005 based out of Mumbai providing credit scores to banking and Non-Banking Finance Companies across the country. Their detailed report can help you keep track of your credit score and help improve it to receive higher loan amounts and lower interest rates.
Importance of a Good Credit Score
If you trying to get a loan from a bank or any Non-Banking Finance Company credit score is very important to determine your creditworthiness for repayment of the loan. every lender will have a check about your credit history through the credit bureaus before approving a loan application. A credit score is very important for you to get a higher loan amount with added benefits like low-interest rate or flexible tenure. A good credit score will also help you get quick approval of loans in case you need urgent cash. A score of 700 or above is considered ideal for an individual to get quick approval of the loan application along with higher approved limits and lower interest rates. Having a high credit score gives you the power to negotiate the interest rates or added benefits for your loan.
- Quick approvals: a good credit score ensure your loan application is approved quicker. A high credit score represents an individual as a better prospect for a loan, thus giving priority to individuals with a high credit score for approval of loan application. You can expect your application with a high credit score to be approved before ones with a low score.
- Higher amounts: having a good credit score shows that you are responsible borrower and lenders will be willing to approve higher loan amounts. On the other hand individual with a low credit score will find it difficult to get approval for higher loan amounts. If you wish to have a much higher loan amount a good credit score is very essential for approval of your loan application.
- Easy loan application process: an individual with a high credit score will find it easier while applying for a loan with banks and other Non-Banking Finance Companies. lenders are willing to approve loan applications of individuals with a higher credit score. A good credit score establishes the faith of the lenders in an individual for being able to repay the loan on time.
- Lower interest rates: an individual with a good credit score can negotiate his interest rates. Lenders are willing to offer lower interest with people with a high credit score as they are more likely to repay the loan on time. On the other hand, people with low credit scores often get a high-interest rate offer from lenders. This is due to the fact that lenders are willing to honor your regularity and maintenance of a good credit score.
- Negotiating powers: having a high credit score gives you the freedom to negotiate better deals with lenders. As lenders have more faith in people with high credit scores they are willing to offer better discounts and benefits to attract customers to take a loan from them. Whereas lenders will be unwilling to grant a loan to individuals with a low credit score. You can also negotiate your interest rates if you have a good credit score.
- Offers and discounts: a good credit score will give you exciting offers while applying for a credit card from lenders. Banks and nonbanking finance companies will be willing to offer exciting discounts or other benefits to customers with a high credit score.
How to improve credit score? - Use Scofit
Scofit offers a personalized plan to track and improve your credit score. It shows a detailed report of your credit history with tips and suggestions to maintain a better credit score. This report will help you with maintaining a good credit score for getting quicker loans at higher limits on low-interest rates. Scofit is an expertly designed report different from your usual credit reports with detailed analysis and representation of your credit behavior.
In the report, you will get all the detail information about your loans, credit cards, EMI, etc related to your credit behavior. With the detailed analysis and personalized tips, you can improve your score for the benefits mentioned above.
Every individual is different with a different credit behavior. It is thus very essential to provide personalized tips and suggestions for an individual to improve his credit score. Generalized tips and suggestions are not as effective as personalized suggestions based on individual spending habits, credit history, loans, etc.
You can get an overall view of your credit status along with your active loans, credit cards, and other such credit-related activities directly on the Scofit report. It will help you determine instantly whether you are eligible for a loan at the moment or not. This is essential because every credit inquiry can affect your credit score if your application gets rejected. It does ideal for you too to apply for a loan with a single organization if you are not sure of getting approval. Same goes with a credit card, you should not apply for a credit card with multiple vendors if you are unsure of your eligibility.
Every hard inquiry from a lender to a credit information company will affect your credit score negatively. Scofit thus offers periodical reports to individuals to know their current credit score and track such inquiries. In most cases, a credit score inquiry will show you an older credit score determined by the agency. However, a credit score is dynamic and it keeps on changing based on your credit activities. Scofit will send updated current credit score of an individual to help them to determine the eligibility for a loan before applying. This will not impact their credit score in case they find themselves ineligible to apply for a loan at the moment from the particular lender.
Features of Scofit
Along with credit score, tips and credit profile Scofit also offers insights into:
- Payment history: It shows the percentage of payments done on time. To ensure you have a good credit score consistently make sure you pay your dues on time. The more on-time payment you make, it enhances your credit score.
- Credit card utilization: It showcases your percentage utilization of your credit cards. To maintain a healthy score, you must avoid using your credit cards unless necessary.
- Number of credit lines: It shows the number of active loans, credit cards, etc on your name. Having a good mix of credit instruments points to a healthy credit score.
- Credit Age: It showcases how long have you held a credit account. The older the credit account, the better.
- Credit Enquiries: It means the number of times a bank or NBFC has inquired about your credit report from the CICs. The lesser the number of enquires the better.
- Defaulted Loans: It shows the loans that are currently in a defaulted state. You at any cost must avoid a defaulted loan. Even a single defaulted loan can adversely impact your credit score negatively.