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Credit Score in India – Everything You Need to Know

Clix June 16, 2021


Whether you approach a lender for a personal loan, small business loan, or home loan, they will check your credit score to see your repayment habits. The decision to approve or reject your loan application is based on this 3 digit number. Ranging from 300 to 900, a high credit score of 700 or above can help you get a loan with better terms and conditions.

Who Calculates Your Credit Score?

In India, your credit score is calculated and managed by one of the four credit bureaus, which are Experian, CIBIL, Equifax, and Highmark. They are licensed by the Reserve Bank of India to collect your data from your lenders and compile your credit report, which includes all your accounts, credit cards, loans, and repayments. Based on this credit report, they use their algorithms to calculate your credit score.

Where Can you Check Your Credit Score?

By keeping tabs on your credit score, you can make smart decisions regarding your finances. Based on your score, you can negotiate and expect better deals and offers on all types of credit instruments, whether secured or unsecured. You can check your credit score in any of the following ways:

Credit Bureaus: RBI has made it mandatory for credit bureaus to provide every individual a credit report and credit score at least once a year for free. You may visit their website to check your score online.

Lending Institutions (Banks,  NBFCs, and Fintech Companies)

Before you check your credit score at a third-party portal, you need to submit a few details, including your name, PAN, date of birth, and employment details. Checking your credit score online does not take more than 2 minutes.

Is It Safe to Check Your Credit Score at a Lending Institution’s Website?

Trusted online credit score checker tools like the one available at Clix Capital are completely safe to use. Clix Capital has a tie-up with Experian to fetch your score from the records with them. Since it is a soft enquiry, you don’t even need to worry about the impact of a credit check on your score. Indeed, you must check your score regularly to keep tabs on your credit health.

Factors Determining Your Credit Score in India

Credit bureaus look into your credit history to calculate your credit score. Factors affecting your credit score include the following:

    • Payment History: How regular you are with your credit card bill and loan EMI payments.
    • Amount Owed: Being highly indebted or using most of the available credit limit without full payments each month negatively affect your score.
    • Duration of Your Credit History: The longer your credit history is, the higher your credit score may be.
    • Credit Utilisation Ratio: The percentage of credit limit you use up determines your credit score. High Credit Utilisation Ratio means reduced credit score.
    • New Credit Applications: Applying for or taking several loans within a short time reduces your credit score.
    • Credit Mix: Having different types of credit such as home loan, personal loan, and credit card indicates that you can efficiently handle different lines of credit and that you are a responsible borrower.

Benefits of Having a Credit Score of 725 or Above

Having a credit score of 725 or above helps in securing credit cards and loans with better offers and easier terms. Lenders prefer borrowers with a high credit score due to their track record of timely repayments. These are the benefits you can have by having a high credit score:

    • Loans with low interest rates
    • High chances of credit card and loan approval
    • Credit cards with increased credit limits and better deals.
    • More power to negotiate for favorable terms

Tips to Improve Credit Score

These are some useful tips that can help in improving your credit score:

Keep a Balance Between Your Income and Expenses: Make a budget and keep your expenses lower than your income so that you can have some room for savings as well. Calculate your total income and deduct all your financial obligations from it.

Find Ways to Increase Your Income: Look for part-time jobs or freelance work to increase your income. Doing this will enable you to be consistent with your payments and also make some extra amount that you can use as you desire.

Be Regular with Your Payments: Whether you have taken a home loan, small business loan, or personal loan, paying their EMIs should be your priority. If you are handling too many loans at a time, consolidate them with a personal loan for debt consolidation to manage them well.

Other useful tips include reducing your credit utilization ratio, maintaining old accounts, increasing credit limits, and diversifying your credit mix as mentioned above. Check your credit score and see where you stand..

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