Manoeuvring bank technicalities can often seem extremely confusing. There are complicated terms and financial concepts that can be difficult to fathom. However, a good credit score can genuinely put an end to a number of bank-related worries, especially if you’re looking for a loan.
What is a credit score?
In simple terms, a credit score would be a numerical estimate of how likely you are to repay a debt on time. Generally, a credit score looks like a three-digit number between the range of 300 and 900. So, if your credit score is closer to the upper limit of this range, it signifies that you, as a loan taker, would be very likely to repay a loan on time and that taking you as a client will not put the bank in a risky position.
Your credit is what a bank will use to assess whether approving your loan request will have the potential of turning into a liability for the bank. Whether it is a loan, a mortgage, rent, service costs, or credit card debt, your credit score can essentially determine your chances of being viewed as a trustworthy loan taker by the bank. This in turn will help your chances of securing a loan or the like when you need to.
What would a good credit score look like?
In India, credit scores range from 300 to 900. The goal is to bring your credit score as close to 900 as possible. Generally, a credit score somewhere between 750 and 900 would be considered an excellent score. However, if you’re somewhere upwards of 650, too, you can simply continue with building a commendable credit history down the same trajectory, because you’re en route to a good place in terms of your credit score!
What you need to look out for is a drop in your credit score. If it falls below 500, you need to pull up your socks and focus on building a good credit history, to increase your credibility as banking institutions see it.
What are some factors determining your credit score?
Your credit score is not a random number. There are many factors that influence one’s credit score, and being diligent about balancing them could really help your score to shoot up.
- Simply paying your bills timely and consistently could be a huge factor. In this case, bills would include almost every kind of due you may have, including the likes of your credit card debt.
- Since we are talking about credit cards, it would be a good idea to try and limit your credit card expenditure to ensure that you don’t go overboard with the debt incurred.
- It could be really helpful to actually check your credit reports from time to time, to be aware of where you stand in terms of debts incurred and repaid. That way, you could always have the information you require to maintain a high credit score.
- Also, pulling out loans at the drop of a hat could actually hurt your credit score, even if you are consistent with the repayment. While you need some credit history, you should also regulate your need for credit so that it doesn’t appear as if you’re always running out of funds.
A good credit score can often add to your credibility as a client of a banking institution, or as a loan-taker. So, being equipped with the necessary information about the viability of your credit score, as well as maintaining a good score, can prove extremely useful when you’re dealing with financial matters.
