5 Things you Should Understand About Credit Scores

Knowledge is power, and power is everything. Did you know that just the three digits that represent your credit score can have a huge impact on the financial well-being? If you have been overlooking news and articles related to CIBIL score and creditworthiness so far, then it is time to finally learn about it. The more you will avoid learning about CIBIL, the more difficult it will become for you to get loans and credit cards in the future.

So, here are top five things that you absolutely must understand about credit score:

free credit report1) CIBIL Score and its Importance

Your CIBIL score is a three digit score that is provided by Credit Information Bureau (India) Limited, the institution that collects and maintains records of every individual’s payments related to loans and credit cards. The score ranges from a  minimum of 300 to a maximum of 900.

2) Things That Impact Credit Score

There are a number of things that can affect your credit score, and thus should be given due attention to. These are:

  • Late Payments- Late loan payments, and credit card bills payments, are the most common reason behind low credit score. A lot of people don’t take payment deadlines seriously, believing that it won’t make a big difference. However, the reality is that every single payment is of significance when it comes to your credit score, and thus should be always taken seriously.
  • Mistakes in Credit Report- Your credit score is mentioned in your credit report(provided by CIBIL), which is also important. If there are any mistakes or errors either in your personal details or the payment history itself, that are mentioned in the report, then it could lower your score.
  • Remarks and Comments: The lenders from which you take loans can leave remarks in your credit report, which can be detrimental to your score if they show you in bad light. If this is the case then to improve credit score you have to request them to get them removed from your report.

3) You Can Get a Copy

The access to your CIBIL report is not restricted to financial institutions alone. You can get a copy of your report as well. All you have to do is create an account on CIBIL’s official website and submit a few documents for verification purposes. If all goes well then they will either send a report to your email address, or to your residence itself. You just have to pay a small fee for the service.

While getting a copy of your CIBIL report is an optional service, it is highly recommended so that you can keep an eye on the progress of your score.

4) Other Credit Information Companies

Although CIBIL is the authority bureau on credit management and regulation in India, there are  3 other bureaus as well that work on the same principles. In some cases your financial intuition could choose to consider turning to these bureaus as well apart from CIBIL, when considering your loan or credit card application.

Here are the 3 companies other than CIBIL:

  • Equifax: Established in 2010, the company scores individuals on a scale of 1 to 999, and is known for its new technologies and services.
  • Experian: It also scores on the scale of 1 to 999, but takes longer to provide credit report. It also offers the most cost effective means, by offering credit report for just Rs. 138.
  • Highmark: Highmark scores range from 300 to 850, and offers unique solutions such as data quality management, and credit assistance, etc. Since the company is relatively new it has some really innovative products for modern banks and other financial institutions.

5) Difference Between Free and Actual CIBIL Report

A lot of websites these days are claiming to offer free CIBIL report, when in reality they are just misleading the people. What most of these websites are offering is an estimate of your Credit Score, and not the actual credit score. If you want to improve CIBIL score then you must always refer to the actual CIBIL report, and not the rough estimates.

By being informed on your credit score and credit report, you can make sound financial decisions easily. The points explained above can be of great help in that enterprise.

 

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