Credit Score

The all Important Metric to Boost Your Loan Application

Whether you are an individual, a business owner or a partner in a company, if you are in the market for a loan of any sort, you must know that your credit score can make or break that deal.

But what exactly is a credit score?

What’s a good credit score?

Do you have any say in how the score is calculated?

But most important of all – what’s the future of your loan application if your credit score is not all that great?

Let’s find out.

What is a Credit Score?

A credit score is a mathematical number that banks and financial institutions use to gauge that all-important question – should they lend to you?

You see there are two loan categories – secured and unsecured loans. Secured loans are where you offer banks collateral such as that fancy new car you just wheeled out from the dealer against a car loan, or the house you just bought against a mortgage. Unsecured loan as the term suggests has no collateral. Most credit cards and personal loans fall under the unsecured category.

But regardless of whether you take a secured loan or an unsecured one, whether you take a personal loan or a business loan, the lending financial institution just wants to ensure that you pay the E.M.I (equal monthly installment) on time.

While that’s akin to trying to guess the future by gazing into a crystal ball, bankers do love to minimize risk (and maximize returns). So what they do is look at all your accessible financial records – loans you have taken and repaid, and credit cards used. Don’t worry they aren’t looking at what you bought online.

A good credit score implies that you are punctual at paying the EMI, a low credit score indicates that you can be unpredictable when it comes to loan repayment.

A low credit score is associated with you being a high-risk customer, while a high credit score means that most lending institutions would only be happy to give you more money.

A high credit score improves your chances of borrowing from a bank or financial institution in the future. A poor credit score, well that’s not such good news. Most banks and financial institutions in India would be unwilling to take a higher risk unless you can compensate them via other means. Typically, a bank/ financial institution would charge a higher rate of interest or seek additional collateral from such borrowers.
Depending on whether you are applying for a loan as an individual or as a business/ company these two credit scores can impact your chances of loan approval-

Consumer Credit Score:

A consumer credit score reflects your ability to repay a loan as an individual.

Commercial Credit Score:

For borrowers that are public limited companies, private limited companies, partnership firms, and proprietorships, the point of reference is the commercial credit score. The score reflects the entity’s likelihood of missing payments based on credit history. Commercial or company credit score report includes existing credit exposure of the company, types of commercial credit availed, and information on loan guarantor (if any). The report may also include information on borrowing-related lawsuits against the company

What’s a Good Credit Score?

As mandated by the RBI and the National Housing Bank, banks and financial institutions in India, are required to report all retail and commercial borrowings. And it’s the job of credit rating agencies such as Experian, CIBIL, Equifax, and CRIF High Mark to calculate credit scores and generate credit reports for individuals and businesses. At the time of fresh lending, any bank and financial institution can approach the credit agencies to view your credit score and report. All four credit scoring agencies in India use their proprietary calculations and algorithms to estimate your credit score.

Credit Bureau Credit Score Range
CIBIL Score 300-900
Experian Score 300-900
Equifax Score 300-850
CRIF High Mark Score 300-900

CIBIL is the most popular credit bureau. Here’s a summary of what is considered a good CIBIL
score for individuals and CIBIL rank for companies.

Can You Change Your Credit Score as of Now?

You cannot change your credit score at any given point in time. What you can do is influence how your
credit score will look in the future.

5 Tips to Improve Your Credit

Monitor due dates for Your Exiting
loan EMI s and credit card dues
Access Your Credit report to Check
For any erroneous reporting
Dont apply for multiple source of
creditat the same time

It can take anywhere between 12 to 18 months to enhance your credit score. The good news is that often banks and financial institutions have different minimum credit score requirements for various loan products.
Here’s an indicative figure of good credit scores as per loan type.

Loan Type Good CIBIL Score
Home Loan Above 650
Personal Loan Above 700
Loan against Property Above 650
Business Loan Above 700
Car Loan Above 700

Do you have more questions on credit scores?

Read our customer credit score FAQ’s.

Where can I check my credit score for free?

You can check your credit score for free with New Delhi Financial. All you have to do is to provide your PAN or a proof of identity along with your contact number. We assure you that your details will not be stored by us. We will use the information to only verify your details from the database and obtain the credit score.

Do I need a PAN to check my credit score?

Yes, you need a PAN to check the credit score.

Why do I need to provide a phone number to check my credit score?

A phone number will help to identify your details in the databas e. When you enter the phone number, the credit information agency fetches data for all the credit facilities availed with that contact number on record

What factors can adversely affect the credit score?

There are many factors that can lower your credit score. Here are some of them: · Failure to fix errors arising in the credit report.

Delaying or missing credit facility payments, which indicates to future borrowers that you are a high-risk customer.

Filing for bankruptcy.

Failure to fix errors arising in the credit report.

If you have high credit utilization, that’s a higher risk associated with your profile as a borrower.

Multiple hard copy credit score inquiries can indicate to future creditors that you are seeking multiple loans.

Will a self-inquiry affect my credit score?

As long as you are simply checking the information online, then your credit score will not be adversely affected. Multiple hard copy credit score inquiries can indicate to future creditors that you are taking multiple loans and that lowers your credit score.

Is there a limit to the number of times I can check my credit score?

No, you can get access to your credit report online as many times as you require. However, a change in the score can take several months, so checking too often may not help.

What brings a change in the credit score?

Your credit score can be impacted, positively as well as negatively. When you show discipline in repaying existing loans as per scheduled dates over a sustained period, your credit score will improve. However, as discussed above, (point 4), the score may also decline.

If I own multiple credit cards, will my credit score be affected by it?

It is not the number of cards that will influence your score. The credit score will be negatively impacted if -

You have a high outstanding (close to assigned credit limit) on the credit cards

If you have delayed the monthly payments.

Of if you are only paying the minimum amount due month after mont

Why would a bank want to check my credit score?

A bank or financial institution will check your credit score if you have applied for a credit facility from them; the idea is to assess the risk of lending to you.

Are my CIBIL score and credit information report the same thing?

The credit score is a single mathematical figure derived basis information in your credit information report. In other words, the credit score is the summary, and the credit information report is a listing of all the factors that influenced your score.

What details are available in my credit report?

Your credit report includes details about you such as your name, address, contact number, PAN, credit history, current credit facilities, and the repayment pattern.

Is it possible for any information to be removed from my credit report?

No, as long as all the information in your credit report is correct, nothing that can be removed from it. This ensures that the data relating to an individual’s credit history and creditworthiness is unbiased. However, if you ever notice any mistakes in your credit report, you can get it corrected by contacting the concerned credit bureau.

Who can access my credit report?

An individual or company credit report can be accessed by RBI-recognized financial institutions, banks, and the government.

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