A credit score is a number that depicts creditworthiness. The credit score ranges from 300 to 900. The higher the credit score, the higher will be the chances to obtain loans. Credit score depends on your credit history.
Different Level of Credit Scores are
- NA/NH: Not Applicable/No History
- 300-549: Bad
- 550-649: Average
- 650-749: Good
- 750-900: Excellent
The above are the various ranges of credit scores, to build the credit score you just need to follow simple steps as discussed below.
Steps to build your credit scores
- To improve your credit score first start reviewing your score online. Because by knowing the result, you will get the info that which factor is affecting your score, then try to resolve it.
- Pay your bills on time.
- Clear all your debt
- Always keep balances low on credit cards
- Apply for new credit cards only when needed.
- Never close the unused credit cards.
- Track your credit card reports regularly, because any wrong information will pull down your credit score.
- Avoid getting multiple cards as it makes multiple inquiries.
How much time does it take to rebuild a good credit score?
- Time taken to rebuild credit score is directly proportional to your credit history.
- If you have negative information on credit history, it will take much time to build a credit history.
- Example Delinquneces remain for 7 years over the credit report
- Bankruptcies remain for 10 years on your report.
- Inquiries remain for 2 years on the report.
- There is no shortcut to improve your credit score.
How Do They Calculate Credit Scores?
- Different lenders apply different mathematical algorithms and calculate credit reports.
- Credit score is computed by implementing an algorithm for the info of one of the three credit reports of a particular person.
- The most common credit-scoring model in India is CIBIL.
- Mostly the scoring models consider the payment history on loan and credit cards and calculate the scores.
- Also, check on the regular usage of the card, how long was the account was opened, types of account does a person have, and how * often the person is applying for the new credit.
- These are the following aspect where the financial companies or lenders consider and compute the scores with the help of * mathematical algorithms.
Factors affect Credit Score
- Credit Score depends on the type of scoring model that is used.
- Payment histories about loans and credit cards
- Credit Utilization Rate
- Number of newly opened credit accounts
- The number of inquiries of the credit report.
What is CIBIL Score Range?
- CIBIL Score is a 3 digit number, which computes credit history by considering credit mix, new credits, tenure, credit utilization, credit balance, and repayment history.
- CIBIL Score ranges from 300 to 900
- The higher the CIBIL Score the easier for loan approval and credit card.
- Delay in payments lead to lower the CIBIL Score
What credit information companies are available in India?
- TransUnion CIBIL Limited
- Experian Credit Information Company of India Private Limited
- Equifax Credit Information Services Private Limited (ECIS)
- CRIF High Mark, etc.