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Your credit score plays a key role when you apply for a loan. The following ways will help you in understanding your Credit Score:-
It is a detailed report of your credit history. Credit bureaus collect information from various sources (banks, lenders, credit card companies and NBFCs) to create your credit report. Credit bureaus charge Rs 300-500 for providing a credit report.
Free Credit Report:
The RBI has mandated that all credit information companies should provide one credit report free to a customer in a year. This free facility will give a basic credit report. You can log on to the websites of the credit bureaus and avail of this benefit directly.
Your credit score:
Though the score ranges between 300 and 900, the average is 750. The higher the score, the lower is your risk profile and easier for you to get a loan. Majority of those who get a loan have a score of 750 and above. With a lower score, you may not get a loan from a big bank, but from a smaller bank or NBFC, at a higher rate of interest.
How it is calculated?
Your credit score is based on your credit behavior, payment history, the type of loans you have, your credit limit utilisation and the kind and number of enquires raised by lenders against your PAN.
Are you over leveraged?
Lenders use the credit report to know how leveraged you are. If you have taken too many loans or have not been repaying in time, your credit score and chances of further borrowing get nixed. Similarly, the credit score also tells lenders how the person is utilizing the credit.