The importance of a person’s credit score in assessing creditworthiness cannot be overstated. A lender, like a bank or non-banking financing organization, will determine a potential borrower’s credit score to decide whether or not to lend to that person. The amount of the loan that is approved and the interest rate that the borrower will pay on the loan are both influenced by the borrower’s credit score; you can check on MobiKwik. Furthermore, the lender may deny the loan application if the borrower has a low credit score.
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What Is a Credit Score?
A credit score is a three-digit figure. The average range is 300 to 900, with 900 being the maximum attainable score. When you request a loan, banks and other regulated lending organizations verify your credit score. One of India’s four credit bureaus, TransUnion CIBIL, is responsible for creating this score (other bureaus include Experian, CRIF High Mark, and Equifax). However, credit scores from all these bureaus may vary as they have different algorithms for calculating their credit scores.
What Is a Good Credit Score Range?
Anything over 700 is considered good, and anything over 850 is considered excellent. To experience a seamless and trouble-free credit experience, you must have a healthy credit score. The website of credit reporting agency TransUnion CIBIL states that the closer your score is to 900, the more likely it is that your loan application will be accepted. A credit score of 750 or more is typically regarded as good. On the other hand, finding a loan can be challenging if you have a low credit score.
As a result, it is critical to be aware of the variables that affect your credit score, such as the prompt and complete payment of credit card balances and equated monthly installments (EMIs). High credit utilization and late or missed payments may be the leading causes of your low score. The percentage of a credit cardholder’s total credit limit that is being used is known as the credit utilization ratio.
Your credit score can increase over time as well. To ensure that it improves over time, it is crucial to have a strong credit score and practice sound money management for a convenient and easy online loan EMI payment through apps like MobiKwik.
How Can You Achieve a Good Credit Score?
Many people think that having bad credit means they cannot access financial choices. However, due to your credit behavior, your credit score will evolve. Here are some things to keep in mind to raise your credit score:
- Prevent defaults: Your credit history is a significant indicator of your probable financial stability, and your credit score is calculated by looking at each of your financial transactions. Therefore, you must do all your DMI finance EMI pay on schedule and adequately settle your debts. You can raise your credit ratings by avoiding late payments, defaults, short payments, etc. In addition, it will improve your credit history, which the lenders will see as an indication that you will manage your debts in the future with greater responsibility.
- Monitor your credit use rate: The ratio of your credit limit to your credit spending is known as the credit utilization rate. After credit history, this is the second most crucial factor. You’ll get fewer points if your ratio is high, which will lower your credit ratings overall. Therefore, managing your credit limit and securing it carefully is advisable to avoid exceeding your credit limit.
- Take loans that are simple to repay: During sales, you could find a lot of quick and straightforward lending possibilities as well as attractive discounts for your DMI finance EMI pay. Many people use the down payments from their annual bonuses to finance large-ticket items. While it might be effective for many, others might find it challenging to manage their online loan EMI payment and fail to pay their EMI. It can lower your credit ratings. Therefore, it is sage to obtain credit after carefully considering its necessity and ability to repay.
- Multiple loans at the same time: To raise your credit ratings, aim for a healthy ratio of secured loans—like mortgages—to unsecured loans like credit cards. Putting more emphasis on fast loans will be suitable for your credit scores.
- Regularly check credit reports: An excellent way to keep your credit behavior under control is to check your credit ratings frequently. You can spot changes in your credit ratings with continual monitoring and make the required corrections. It will also help you gauge how much credit you are using and may alert you to any unusual activity, such as transactions you are unfamiliar with.
Your credit score will serve as a barometer for how much credit you use and will be a significant determining factor for lenders. Unfortunately, people frequently only know about it once their loan is denied. Therefore, check your credit ratings after you apply for a loan. It is something that is developed gradually and can be continuously enhanced. To have total control over how well your credit is performing, periodically check your ratings.