7 Things to Know About Credit Score

A Credit Score represents an individual's credit worthiness. The score which is ranged between 300-900, helps banks and financial institutions determine your repayment capacity. A higher the credit score suggests lesser probability of a default. 

Here are some of the important facts you should know about Credit score:

1. Credit Score and Credit Report are different: A credit score is 3-digit number that summarizes credit report of an individual. It determines his/her ability to make repayments. Meanwhile, a credit report is a summary of an individual’s credit history such as credit accounts, debt information and so on.
2. Checking your own score is harmless: When an individual checks his/her own score it is termed as a soft enquiry. A soft enquiry does not have any impact on your credit score. Meanwhile, a hard enquiry which is done by banks and lenders does affect your credit score.
3. Ideal Credit Score: A credit score of 750 and above is considered as an ideal score. Individuals who have a score within a range of 750-900 will get loan and credit card offers with at an attractive rate. A credit score below 750 suggests you have been negligible with respect to your repayments.
4. Credit Score is accessible to banks and lenders: Your credit score can be accessed only by banks and lenders as they are CIBIL Members. Any lender will have to access your credit score and credit report if you apply for a loan or credit card. In addition to banks, you can access your credit score and credit report directly from CIBIL and other credit bureaus by making a payment. There are several online platforms that offer a free credit score check.
5. Low Credit utilisation ratio is the key: Try to keep your credit utilisation ratio low as it will have an impact on your credit score. It is better to not get closer to your maximum card limit as it is more likely that it will cause damage to your score.
6. Credit score calculations differ for credit bureaus: There are a total of four credit bureaus in India viz, CIBIL, Equifax Credit Information Services Pvt. Ltd, Experian Credit Information Co. of India Pvt. Ltd and CRIF High Mark Credit Information Services Pvt. Ltd. All these credit bureaus have different methods to calculate the credit score.
7. Factors that decide your credit score: There are several factors that are taken into consideration that determine your credit score. Average credit age, debt repayment, credit utilisation ratio, negative status accounts, credit score enquiries and secured or unsecured type of credit account.