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A credit score is a 3-digit numerical expression credit bureaus calculate based on people's credit histories. India has four credit bureaus – CIBIL, Equifax, Experian, and CRIF Highmark – that keep records of each Indian citizen’s credit accounts and see how responsibly they handle their credit. If you pay your loan EMIs and credit card bills on time, have a diverse mix of credit accounts in your portfolio, have minimal outstanding credit balances, and have a long history of handling credit responsibly, you will build a good credit score over time.
In the following sections, let’s explore everything you need to know about credit score, how to check credit score, its importance, benefits, factors affecting it, and other crucial details.
Those of you thinking, “How do I check my CIBIL score for free?" can follow these steps:
Besides this, you can also use a CIBIL score calculator on a lending institution’s website to check the CIBIL score online. However, ensure it is an authentic and trustworthy website with advanced security measures to keep your financial details confidential. Those with questions like “When should I check my credit score?” can check it before applying for credit to measure their current eligibility.
When you apply for a loan or credit card, financial institutions like Hero FinCorp check your credit score online to determine your creditworthiness and the risk of default in lending money to you. While the CIBIL score ranges from 300 to 900, anything above 650 is considered good enough to build credibility and attract lucrative loan offers. These are the common credit score ranges worth knowing:
Importance of Regularly Checking CIBIL Score
Everyone suggests checking your CIBIL score regularly. Here are the reasons why doing that is important:
Benefits of Having a Good CIBIL Score
Since lending institutions check your consumer CIBIL score to assess your creditworthiness. It is essential to have a good credit score before applying for a loan. A high credit score demonstrates responsible credit behaviour, making potential lenders more confident in approving your loan requests. You also get other benefits like:
Consequences of a Low CIBIL Score
A low CIBIL score indicates high-risk credit behaviour, leading to the following consequences:
Credit bureaus calculate your credit score based on several factors, including the following:
Although it is not an overnight process, here are some practical ways to improve your credit score fast:
Once the credit score reaches a decent mark, follow these tips to maintain it there:
While most loan companies want to know your CIBIL score while evaluating your credit application, here are a few benefits associated with a high credit score:
The credit report is like a credit history summary that credit bureaus calculate based on your credit accounts, repayment history, and overall credit behaviour.
The credit report acts as a credit reference, based on which the credit bureau measures your credit score.
The credit report is a standalone document credit bureau creates based on your credit history.
You can request a copy of your credit report from the credit bureau only.
One credit bureau provides one free credit report in a year. Additional procurement of credit reports attracts charges.
A credit score is a 3-digit number that you get based on your credit report.
Most lending institutions check CIBIL scores to measure your credit risk as an applicant.
You get a CIBIL score solely based on the data available in the credit report.
You can check your free credit score at the credit bureau’s website or a third-party entity or NBFC.
You can check your free credit score online any number of times without restrictions.
A credit bureau is a data collection agency that gathers information about an individual's credit history and payment records from various credit accounts and makes it available to creditors. Also known as credit reporting agencies, they work in two ways:
The Reserve Bank of India has authorised four credit bureaus to collect credit-related activities of Indian citizens:
When you apply for a loan, your financial institution will approach a credit bureau to obtain your credit report and evaluate your loan application.
