In the world of finance, you see a lot of products like loans, credit cards, Insurance, mutual funds, hedge funds, etc. if you dig into each category, you will find a lot of sub products which would support its title. That is just tip of the ice berg. When you dig deeper, there are financial products you won’t even understand.
Let us take an easy example of credit cards for instance, if you apply for one at a particular credit card vendor, you will be given a lot of credit card options like silver, gold, platinum, etc. In these categories as well there will be different terms for different cards with different benefits and different rewards.
Just like any other financial product, there are types of credit score as well. Yes, we are right! There are many credit bureaus who record your financial transactions with them and when demanded by you or a future lender they produce the report.
Now you would be thinking, how many score do I have and how should I understand if which credit score should be referred for my financial transactions? Do not worry; you are not alone to get this question in your head. As many of us are clueless on what is a credit score? How is it important? How many of them are there?
We will answer all these questions here,
A credit score
A credit score is a number that allows the lender to judge your financial standing. With the help of a credit report the lender can see and gauge how you make your payments and if you are making all your payments on time. If you have a better credit history, you will act as a hot lead for loan lenders in the market.
How is it important and how to improve your score?
Every individual has a credit report, loan lenders in the market always seek people with good a goods score so that they can lend money with ease. Not only in terms of loan but a good report can help you land at your dream job; get you a fancy house for rent and many more. The credit score is making its way out of financial market and entering into common grounds as well in terms of verification process.
If you monitor your credit report from time to time, you will know where you stand and this can lead you to act on improving your score. Just make sure, you make all your payments on time, use less debt, have variation in loan accounts and do not close any existing credit lines. For example, if you have a chance to close your car loan, try to close it as it will save you a lot of money in car loan interest rate but do not close your credit cards. The older credit cards you have the more you have chances to get your score up in no time.
How many are there?
As mentioned earlier, there are many credit score available with different bureaus in India. Credit bureaus like Transunion, Equifax, CIBIL, etc. are the main players in this business. As far as Indian lenders go, they prefer getting CIBIL report for your verification purposes. If you are considering one score, you should consider CIBIL.
Their scoring models are entirely different from one another and the score range also differs. This is one particular reason why, every lender just sticks to one credit report which then makes the process easy for them.
Even though you might think, you only have one credit score to monitor, you are wrong. You have a dozens of score which can give you different credit rating and get you confused. Instead, just focus on one and if necessary two for your reference. Check with your bank which credit rating they prefer and start monitoring the same, because in future if you are considering a loan, you will go to your home bank first.