Rupeedo Stupido In ‘Credit Score Lows’

By | June 4, 2018

Your Credit Score plays a big role in determining the fate of your loan or Credit Card application. Know more about different Credit Score ranges and how banks interpret them.

Rupeedo Stupido In ‘Credit Score Lows’

Your Credit Score plays a big role in determining the fate of your loan or Credit Card application. The need for a good score to get a loan doesn’t change with the type of loan that you want. It could be an unsecured loan like a Personal Loan or a secured loan like a Home Loan or a Car Loan.

Your Credit Score is given due importance because it tells banks about your credit repayment behaviour and capacity. Banks ideally prefer giving out loans to individuals who have a good debt repayment track record. Financial institutions gauge this from your Credit Score.

An individual with good financial credibility will have a good Credit Score. You can check your Experian Credit Score for free on BankBazaar and also get a detailed credit report for no cost at all.

Depending on the credit bureau—CIBIL, Experian, High Mark and Equifax—your Credit Score can range from 0 to 900. Some credit bureaus start your score from 300. The higher your score, the better it bodes for your loan or Credit Card application. Generally, a Credit Score of 750 and above is considered good by banks.

Your Credit Score is a summary of information in your credit report. Any change in this information changes your score. Your credit management habits, like timely repayment of your dues, has a direct impact on your score.

Additional Reading: 5 Misconceptions About Credit Scores

Let’s look at the different Credit Score ranges and how banks interpret them:

0 or -1

Let’s use CIBIL Score as an example.

0 CIBIL Score means that credit history is available only up to a period of less than 6 months. Other credit bureaus might use the term ‘NA’ or ‘not applicable’.

CIBIL score of – 1 means non-availability of credit history. It is also indicated by ‘NH’ or ‘no history’.

Not having a score is not necessarily a bad thing, but it makes it difficult to get a loan. However, some banks and NBFC lenders do consider an applicant’s credit appraisals, income proofs, employer and employment details etc. in the case of a 0 or -1 Credit Score.

Other credit information agencies in India are also adopting a credit rating system for potential borrowers who have less than 6 months of credit history. Equifax, for example, is issuing scores ranging from 300 – 900 similar to the scores for those with satisfactory credit history. Experian has a scale of 1 – 6, which is used to rate borrowers with less than 6 months of credit history with 1 being ‘most risky’ and 6 being ‘least risky’ in terms of defaulting on loans.

Additional Reading: 6 Credit Cards If You Have An Excellent Credit Score

0 – 650

You aren’t in the best position to apply for a loan or Credit Card if your score is in this range. In case you get a loan at all, you might get charged a higher rate of interest. Lenders might hesitate to give you a loan because applicants usually fall in this range due to payment defaults. Defaults have a strong impact on your score and it may be a while before the scar fades away from your credit report.

650 – 699

A Credit Score in this range indicates moderate risk. Your chances of getting credit is better but the terms may not be entirely favourable. According to media reports, only about 5.2% of all new loans are sanctioned to applicants that fall under this category. You will still need to work harder to improve your score!

700 – 750

This is the ‘grey area’ where things can swing in either direction. Generally, it’s a relatively safe zone for your Credit Score. A score in this range means that your track record is satisfactory and getting credit on favourable terms is easier. According to CIBIL data, as reported by the media, about 10% of all new loans are sanctioned to applicants that fall within this range.

750 – 850

Most people have a Credit Score that falls within this range. On a Credit Score gauge, this range is shown in green, which means that it is relatively easier to get a loan or Credit Card. But you must keep in mind that banks consider many other eligibility factors before taking a decision on your application. A good Credit Score is a major requirement, but not the only one.

850 and above

A Credit Score above 800 is a model score indicative of excellent debt management skills. It is rare to not get a loan or Credit Card with this score.

Additional Reading: How Long Before Your Credit Score Starts To Improve?

Rejection of your credit application causes a dent in your score. Hence, it is better to check your score before submitting your application. If your score is low then take some time to fix it before submitting your application.

Also, each time you submit an applications banks make a hard enquiry to check your score. This also lowers your score by a few points. Hence, it is better to submit only one application at a time. Too many applications over a short period of time may show you as a credit-hungry person to lenders.

However, when you check your own score, it doesn’t change in any way. This is called a soft enquiry. In fact, it is recommended that you check your score regularly. This will help you stem a fall in your score early on and drive you towards maintaining a good one.

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