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What is a Credit Score and How to Check it?

This score is generated by credit bureaus. In India, there are a total of four credit bureaus - TransUnion CIBIL, Experian, CRIF High Mark, and Equifax. 

By Newsd
Updated on :
What is a Credit Score and How to Check it?

A credit score is a number that indicates the creditworthiness of an individual. It is used by financial institutions and lenders to assess the ability of their potential customer to pay back their loans or financial liabilities. This score is generated by credit bureaus. In India, there are a total of four credit bureaus – TransUnion CIBIL, Experian, CRIF High Mark, and Equifax. 

The CIBIL™ Score is perhaps the most commonly known credit score. It is a three-digit number that falls within the 300-900 range and it is internationally recognized. The score is arrived at by looking into 13 categories of information about the individual who is being assessed. 

In this article, in addition to discussing how you can check your CIBIL Score online, we also look at how a credit score is calculated, and the effects of a bad credit score and how it can be rectified. 

Check Your Credit Score Online

You can easily check your credit score online from any of the four licensed credit bureaus in India, and even receive one credit report a year, for free. Just follow the simple steps given below to check your credit score online.

  • Head to the website of the credit bureau, be it CIBIL, or Experian, or Equifax, or CRIF Highmark.
  • Next, create an account on the website by providing relevant information like name, contact details, etc. If you already have an account, log in using your credentials. 
  • After this, fill out the form with details including UID, PAN number, etc. and submit it.
  • You will receive an email to verify your identity, verify yourself and then you will be taken back to the website. 
  • After verification, you might be required to furnish further information regarding your credit card, or loans taken.
  • Once you have provided all the necessary details, the credit report, bearing your credit score will be emailed to the registered email-ID. 
  • If you want to receive your credit report more than once in a year, then you can make the necessary payments to the credit bureau, and you will receive the same. 

Factors That Will Affect Your Credit Score

Credit scores are automatically calculated using information from the credit record of individuals/businesses. Some of the major factors that affect credit scores are:

  • Credit mix
  • Payment history
  • Credit tenure
  • Credit utilization
  • Credit enquiries

There is a common misunderstanding that the income tax slab FY 2021-22 that you fall under will affect your credit score. This is not the case. Credit scores are purely dependant on the credit history and have nothing to do with annual income.

The Effects of a Bad Credit Score

Typically, a credit score between 800 and 850 is considered excellent, while scores between 670-739 and 740-799 are considered good and very good, respectively. Credit scores between 580 and 669 are considered fair, and those between 300 and 579 are considered poor. What happens if your credit score is poor?

  • Availing loans will become tough – Having a bad credit score will make the entire process of availing loans longer as rigorous background checks and verification will be done before loan approval. In fact, you might even face rejection of a loan application from big lenders in the market. 
  • Rates of interest will be higher – Another effect of a bad credit score is that it drives up the interest rate on loans you do avail.
  • Terms will not be as favourable – A bad credit score makes you lose some of the leverage and control over the terms of the loan or insurance that you have as a borrower/purchaser. 
  • Premium will be higher – A bad credit score will also make the premium you will have to pay on insurance plans, higher. 

Rectifying a Bad Credit Score

The private credit bureau coverage of India saw a rise from 21.4% in 2106 to a whopping 63.1% in 2019. This clearly shows that a bad credit score can be rectified, and here’s how you can do that. 

  • Monitor credit report – Keep checking your credit report regularly, so you are aware of any changes, or errors in the report. As soon as you spot any flaws, get them rectified, so no wrong information is used to generate a credit score. 
  • Keep your CUR below 30% – The CUR, or Credit Utilization Ratio is the ratio of the credit balance to that of the credit limit. It is advised to maintain the CUR at 10% if possible, and if not definitely under 30%. This will make it easier to pay off debts. If you already have utilized more than this, try to pay off the higher debts first. 
  • Avoid late payments – Credit scores can be significantly improved if credit is paid off before the due date. The monthly pattern of repayment is monitored by credit bureaus to generate credit scores. Therefore, as the entire history of loan repayment is considered, a track record of early payments will definitely boost your score. 

These are just a few of the many ways in which you can boost your credit score. If you haven’t taken credit from anywhere, your credit score will be at 0. You can build a good credit score by availing different forms of credit – both secured and unsecured and closely monitor it by checking your CIBIL Score online.