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UNDERSTANDING CREDIT SCORE AND ITS ROLE IN LOAN ELIGIBILITY

ksgroup@admin.com
October 4, 2022
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Saving money and cautiously spending it is an art that we have all learnt since our childhood. Piggy banks or first banks are where we understand how to save money as children and then spend it wisely.

Today, your credit report gives a clear picture of your ongoing credit account and your present credit score. Any discrepancy in your credit report can bring down your credit score. It is, therefore, advised to check your credit report and score regularly.

A good credit score will help you to get a credit card, a car loan or a home mortgage. Your credit score is a three-digit number which is obtained after a detailed study of your credit history. It includes your overall behaviour in handling your money and other valuable assets. Your general attitude towards your financial duties, credit history, repayment records and other credit enquiries contribute to your credit score.

Having a higher credit score may enable you to receive more benefits like a higher loan amount, a lower interest rate and your choice of term for the loan repayment. The credit score in India ranges from 300 to 900. The closer you are to 900, that is, the higher the credit score, the better your chances of getting a good deal on personal loans as well as credit cards. This three-digit number is the CIBIL score that gives a complete summary of your credit history. Any score above 750 is supposed to be ideal and you are eligible for various credit cards and loans. If your score is less than 750, it will be difficult for you to avail yourself of any loan.

To get a clear picture and to understand your credit score, the following should be understood:

Above 750 is an excellent credit score

From 700 to 750 is a great credit score

From 650 to 700 is a good credit score

From 600 to 650, the score is not very good and can have a negative effect in case you are looking for a loan

If your score is below 600, there is a minimum possibility that you will get a loan. Credit information companies like Transunion CIBIL Limited source and compile all your credit information from banks and other financial institutions and frame it into a credit information report which in turn, leads to the credit score. The practice of paying your credit card bills and EMIs timely also influences your credit score. Other information that contributes to calculating individuals’ credit scores are the credit history, the number of outstanding loans, and credit card payment history. This credit score has a very strong impact on your loan eligibility as this is calculated using your credit score, income and your current EMI. The higher your credit score, the better the chances of you getting a loan. HDFC home loans facilitate easy access to all your loaning requirements, CRM Team shall provide you assistance for all your queries associated with FIO HOMES II. Besides getting easy loans, people with higher credit scores can negotiate for better interest rates, credit cards with higher credit limits, apply for loans with longer durations, apply for pre-approved loans, and ask for discounts on loan processing fees. It, therefore, gives you better negotiating powers and lets you choose from several options while taking a loan.

Certain practices essential for your financial well-being include:

1. Clear all your credit card and EMI dues: You must keep a record of all your expenses and pay all your bills timely. Any delayed payments and multiple ongoing loans can hamper your credit score and hence, payment of all the EMIs before the due date helps you get a good credit score.

2. Credit cards to be used systematically: Maintain a credit utilization ratio of credit cards between 30% to 40%. It is always better to pay your dues timely and maintain a reasonable credit limit rather than closing the credit cards. You should also avoid using too many credit cards.

3. Do not apply for multiple loans at one point in time: Your credit score can adversely be affected if you apply for multiple loans at the same time from different sources, as it shows your urgency for credit. Multiple unsecured loans affect your credit score drastically. Hence, you should maintain a mix of both secured and unsecured loans. For any kind of business, either for building up your house, buying a new property, or a new vehicle, a loan always makes things easy for you. Hence, it is of utmost importance that you maintain a good credit score which would enable you to fulfil your dreams and make you eligible for a loan as and when you require it.