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What do You need To Know About The Credit Score?

What do You need To Know About The Credit Score

What do You need To Know About The Credit Score?

These days, you must be hearing a lot about credit scores on television and many other means of information. There are a number of finance companies that provide you a free way of checking your credit scores. By now, you must have understood that it is important to keep the credit scores good. But, there are a number of peoples who are still confused about the credit scores and its importance. Understanding a credit score is not rocket science. So, here is a comprehensive guide that will clear all your doubts and will let you know more about the credit score.

So, let’s start this discussion by learning what its credit score.

What is a credit score?

Credit card companies, banks, and many other lenders always look for your credit score before giving you financial assistance. They mainly use credit scores for evaluating if there is any risk that is posed by lending money to consumers. This also helps lenders to mitigate losses that can occur due to bad debt. Before approving any loan, lenders first make use of your credit scores for determining the load holder who qualifies for a loan and at what credit limits & interests.

Thus, your credit score will decide whether you’ll get a good loan and a not so good loan. If the credit score is not good then the lenders have to think whether they will lend you or not. In a nutshell, it can be said that everyone is having their own financial transaction history which will add up to their overall score of credit. There are credit agencies that maintain the entire records of payment history, number of credit cards, and many other important factors.

In technical terms, you can say that credit score is a numerical expression that is completely based on the analysis of any person’s credit files. This numerical expression will represent the creditworthiness of any individual.

Calculation of credit score

How a credit score is calculated is one of the important questions that need to be discussed. There are a number of factors on which it can be calculated. Some of them are listed below:

The credit bureaus calculate your credit score on these above-mentioned factors. Thus, the good your credit score is, the higher are your chances of loan approval.

Good credit score

The credit score generally ranges from as low as 300 to 900. If your credit score is close to 900 then you are all set for quick loan approval. Even, the lenders and financial institutes will have more confidence in you because of your ability to repay the loan. Individuals having a 750 and above credit scores will have quick approval of loans along with lower interest rates.

If the score is less than 600 then there will be limited options for the individual with a low chance of loan approval.

Why credit score important?

For your financial life, both credit history and credit score are important. Therefore, it is important for every individual in many different aspects. Let’s have a look at each of them in a discreet way:

How to check free credit score?

One of the best and easiest ways of checking your free credit score is the CIBIL. On the official website of CIBIL, you can easily check your credit scores with a few easy steps:

If you have a good score then no need to worry at all about the loan amount. For improving your credit scores, you have to pay all the EMIs on time and an increase in the credit limit. Along with this, you can also keep an eye on the usage of credit. So, do not make use of credit card for every single thing.

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