Loans and credit are essential parts of an ambitious life. We always try to spend, invest and increase wealth to expand our portfolio, get productive ROIs, live leisurely and progress commercially.
Moreover, these financial services shape the primary economy of commercial banks and money lenders. Thus, loans and credit are vital for the growth of both the borrower and the lender. But no entity can blindly trust an individual who demands credit. And for the same, they evaluate our trustworthiness through a credit score formulated by the RBI-governed accredited agency, Credit Information Bureau (India) Limited (CIBIL).
CIBIL calculates your creditworthiness and provides a three-digit free CIBIL score referred by all lenders and banks before issuing any loan or credit card. By assessing your credit history, the numerical summarization of it is developed into a free CIBIL score.
You can check your free CIBIL score on any financial organization’s online portal and apply for loans, advances or credit cards, respectively.
It is vital to understand how the free CIBIL score is calculated to strengthen your score so you can accomplish your financial planning and goals.
- Credit History
The agency checks your credit and loan repayment history. This factor drives your creditworthiness. If you have often made delayed repayments, your score will reduce as you become a risk-ridden individual, decreasing your chances of getting credit for substantial amounts. To ensure this factor does not hamper your free CIBIL score, you must be regular in repaying your loan instalments and credit card bills.
- Credit Utilization
Another indicator that influences your free CIBIL score is the amount of credit you use. If you are a regular credit user who functions their life with a decent amount of credit, you will be preferred by money lending entities. On the other hand, you will be believed less creditworthy if the amount used against your credit limit is high.
- Credit Mix
If you have taken numerous loans for different purposes, your free CIBIL score is also affected. Whether they are educational loans, home loans, or long-term commercial loans, CIBIL assesses your frequency and repayment history regarding every loan and devises your free CIBIL score.
- Duration and No. Of Hard Enquiries
Lastly, while credit usage history is important in evaluating your free CIBIL score, the process to get this credit is also valued by the agency to understand your financial behaviour. It includes the duration after which your credit applications are approved, rejections your enquiries face and the frequency of demanding credit.
By knowing the calculation procedure of your free CIBIL score, you should also be aware of the score range that depicts your creditworthiness scale.
NA/NH
This free CIBIL score signifies that your credit history is not sufficient to be evaluated into a score. It indicates either “not applicable” or “no history”. Thus, no financial firm would consider lending you a high amount of loans or advances.
350–549:
This score is considered extremely poor. It means that you have been measured as less creditworthy considering all the above factors, and there is an added risk of credit with you. It also updates the lenders that you are not regular with repayments.
550 – 649:
With this free CIBIL score deemed fair by the firms, only a few lenders will consider lending to you. It signifies that you have been struggling to pay your debts on time. Therefore, the loan’s interest rates might be greater. You must take appropriate steps to boost your score since you are close to a strong credit attitude.
650 – 900:
This range is the appropriate credit score that can get you your desired credit and loans. It boasts your creditworthiness and indicates banks trust you with the money. In addition, it also opens several credit opportunities and benefits for you considering your financial stance and regularity.
Gold in India is one of the major investments for which people use credit. Gold price in India varies occasionally, and people track it to invest in it to attain financial security in future. You can check the gold price in India online on trustable financial websites and get your gold at affordable rates.
Thus, if you are a first-time credit user, you should be professional with repayments and incur frequent credit transactions to build a strong free CIBIL score. Credit is one of the most popular tools to fulfil your aims and create a planned financial stature.