What is a Credit Score?
When we need funds, we often go to financial institutions or people for help. This sum of money is borrowed by an individual for a specific period over some interest. The CIBIL report records the creditworthiness of an individual. CIBIL score full form Credit Information Bureau (India) Limited score is a number that tells the lender about how responsible you are with money. It is the first thing anyone looks up to before giving out their greens. Understanding about it is crucial in navigating the financial landscape. It influences your eligibility and helps you have loans at better interest rates. Know all about it and make informed financial decisions with confidence!
An Introduction to Credit Score
A credit score is a score or a number given to a borrower by credit bureaus. This number helps gauge the creditworthiness of a borrower. A credit score comes into play when an individual decides to take a loan. The lender (a bank or a non-banking financial company (NBFC) requires a credit score to understand the credit history. It helps them decipher whether they will be able to pay back the loan they have taken. The credit score range also affects the loan amount the borrower gets and the loan interest rate. If the borrower has a high credit score, they will also have more control over their loan tenure during the repayment. A credit score bases itself on a few criteria. They are never to be missed from a borrower's perspective.
What is a Credit Score Based on?
Credit bureaus base the calculation of credit scores on several factors. These factors revolve around the money one pays, the number of accounts, the loan duration, and more. The following are the bases:
Repayment History
Individual trustworthiness lies in the payment of timely bills and credits. The credit information companies keep track of past repayments of loans and payments of bills. Monthly EMIs, when paid on time, result in a higher credit score. Alternatively, missed EMIs and delayed payments lead to a decline in credit score.
Number of Credit Accounts
Learning about what is a good credit score comes with understanding when to go for a credit. A person who can distinguish between taking credit for needs and wants is dependable. It has a minor effect on credit score. Having many credit accounts and wisely distributing them between secured or unsecured ones leaves a positive impact.
Duration of Credit Lines
When an individual has had a credit line for a long time, a credit card or a loan, it affects the score. It shows that they have consistently paid their monthly instalments over some time. This pattern of responsible behaviour affects their credit score positively. It shows that the lender can trust them with their money as an investment.
Credit Utilisation Ratio (CUR)
To understand what is a credit score, understanding CUR is vital. Each credit card comes with a credit limit. CUR is the percentage of the credit limit you use each month. The higher the amount spent on a card, the higher the Credit Utilization Ratio (CUR). Ideally, the CUR should be within 30% of the credit limit. Anything above impacts it negatively.
What are the Different Credit Bureaus in India?
In India, the world of credits is in tune with different bureaus and institutions. There are many credit bureaus in India. They are similar and different in some manner. But they are vital for anyone planning for a credit. Therefore, a bit of knowledge about them will always be of use. Some of the most prominent ones are:
TransUnion Credit Information Bureau (India) Limited/ CIBIL Credit Score
CIBIL score full form Credit Information Bureau (India) Limited score is a part of TransUnion, an American Group. It has a firm footing in India and works with over 600 million individuals and 32 million businesses. With pioneer information and insights, it offers credible details about an individual. It is comprehensive and trustworthy in all aspects.
Experian Credit Score
Headquartered in Dublin, Ireland, Experian is an Irish-American multinational credit bureau. The bureau has its system of credit reports for both individuals and companies. It calculates and caters for credit scores and information for lenders and applications. With an impact on the Indian market, it is preferred by several.
Equifax Credit Score
Alongside TransUnion and Experian, Equifax is also one of the largest credit bureaus in the world. It is one of the four credit marking companies in India. Founded in 1899, Equifax services over 800 billion individuals worldwide. With an easy how to know credit score feature, the Equifax interface is easy to decipher and use.
CRIF High Mark Credit Score
CRIF High Mark is an RBI-approved credit bureau founded in 2005. Headquartered in Mumbai, it supports over 4,000 credit institutions.While different businesses and individuals gravitate towards the credit bureaus of their choice, the two prominent credit bureaus in India are CIBIL and Experian.
Understanding the Two Most Prominent Credit Bureaus
Even with different institutes, CIBIL and Experian hold a high place in society. As the two most prominent bureaus in India, knowing CIBIL and Experian in depth can be helpful:
CIBIL:
- CIBIL is the first credit bureau in India, founded in 2000.
- The credit score range of CIBIL is between the scale of 300-900.
- With 300 being the lowest, a score above 700 is considered good.
- All primary banks, financial institutions, housing finance companies, and NBFCs are members of CIBIL.
Experian:
- Experian is an Irish-American multinational credit bureau founded in 1996.
- Experian entered the Indian market in 2010 and has been in flourishing business ever since.
- It has a three-digit score starting from 300. A score of 800+ is considered good.
- Experian caters to over 1 billion individuals and businesses worldwide.
Difference Between CIBIL and Experian Credit Scores
CIBIL and Experian are two different credit bureaus in India. Even with a common feature of credit calculation, they come with multiple differences. The differences are the following:
It is clear and evident that CIBIL holds more weight in the Indian market. It may be because it is an Indian creation and understands the regional market better than the other institutions.
Now that you understand the credit scores, the institutes, and what makes them sturdy, learning how to know credit score is also vital.
How to Check Credit Scores
When learning the two primary institutions, CIBIL and Experian, knowing how to check the score is a part. The following are how one can check their credit scores:
CIBIL Score
- Log on to CIBIL’s website - CIBIL
- Click on the button to check the CIBIL score
- Fill in the required credentials and attach an ID proof ( It has a clear list of accepted IDs)
- Verify the mobile number provided via an OTP
- Click on ‘Go to Dashboard’ and you will be redirect to Your CIBIL Score
- Fill in the credentials and learn your score
- The first credit score check is free.
Experian Score
- Log on to Experian’s website - Experian
- Click on the ‘Get Your Credit Report’ button
- Fill in the credentials and then click on ‘Get Report’ to learn your score
Credit Scores in Propelld
A credit score comes into play when applying for loans. Students often find themselves tangled in the loan process when trying to get loans for their education. There are organizations other than banks and NBFCs that make the loan process smoother.
There are alternatives like Propelld that make education more affordable and accessible to all. Propelld provides student-friendly private study loans for learners pursuing education from its partner institutions. What makes loans from Propelld even more attractive is that, unlike banks, the organization has a unique approval process. Propelld involves a process that loops a student’s academic merit. It checks on their commitment to professional growth, increasing the likelihood of getting a study loan.
It is vital to note that after completing the college admissions process (and eNACH registration), the EMI payments for the student begin. And any delay in payments very quickly leads to:
- Accrued delay charges and penalties and
- Dip in credit or CIBIL score
A poor CIBIL score is an all-around disadvantage. It has a significant impact on the credit score. It is likely to affect their future financial journey. Therefore, such institutions pick the borrower very carefully. Picking promising and determined candidates is a way to ensure a smoother process.
What is more important than what is a credit score is the methodology of how the system of the score works. It ensures you understand what you are getting into when going for credit. It helps you with decision-making and lets you handle and manage your finances in the finest ways!
