September 14, 2024 · 11 mins read
Santosh Kumar
Credit score is crucial when taking out a loan for a car, home, or any other significant expense. This crucial aspect can affect the approval and the interest rate one can receive. So, having a good CIBIL score is essential for an easy and hassle-free borrowing experience. However, a potential borrower must learn to explain his ability to repay the loan within the shortest time and at the lowest interest rates available. Today, more than half of the Indian population lives on loans; hence, checking credit scores for free is the key factor to consider. This blog explores ways on how much CIBIL score is good and how to maintain a good enough score.
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The Reserve Bank of India licenses the Credit Information Bureau (India) Limited (CIBIL), the nation's most popular credit information company. Although other credit information companies, such as Experian, Equifax, and Highmark, are also well-known, CIBIL is the best known.
A CIBIL score considers a person's credit history, rating and report. It summarizes this information in three digits, ranging from 300 to 900, with higher numbers indicating better creditworthiness. The debt repayment record, known formally as the credit history, and the credit report, which draws data from various sources, including banks and credit card companies, make up this score.
When applying for a loan, a person's CIBIL score should be one of the first to get checked. This figure could mean the difference between being accepted or rejected for finance; it can also affect terms such as interest rates (lower) if accepted. Most lenders consider and take into more consideration any score above 700 good. However, most lenders use multiple factors to check credit scores and decide such a score limit, so this number, too, can vary according to lenders' terms and conditions. To boost this score, individuals must pay off all their bills on time, especially those linked with cards and never default on any previous loans. Also, one should always borrow money responsibly and according to one's financial position, as any loan taken and not repaid might impact one's ability to take on new loans.
Read More: What is the Use of CIBIL Score?
A credit report provides the following details:
1. Payment History signifies a person's ability to pay bills on time or the history of timely loan payments.
2. The amount of credit used and how much of the limit has been exhausted by the borrower.
3. The duration and repayment tenure for which credit has been availed on an account.
4. The Credit Mix ratio showcases the proportion of credit cards or loans.
5. What are the recent credit inquiries, and how often does an individual apply for new credit?
Each of these aspects is crucial and holds prominent weight when calculating credit scores. Combining these factors reveals a report on how trustworthy a person is to lend them money, and that is precisely what the credit score represents.
Read More: Is 720 a Good CIBIL Score?
The following enlisted benefits can be availed when someone has a good credit score. Here's why maintaining a strong credit score or knowing how much CIBIL score is good for credit card is crucial:
A good credit score makes renting an apartment more accessible. Many landlords and property management companies use credit scores to evaluate potential tenants. Although 620 is usually the minimum requirement, having 700 or more significantly increases your chances of being approved.
The credit score affects what someone pays for car insurance and homeowners coverage rates. Insurers often base their premiums on credit-based scoring systems. When an individual has good credit, lenders offer lower prices as the slightest chance that these people file claims, so there is less risk involved on their part.
Saving benefits can be easily enjoyed by borrowers as lenders charge lower interest when repayment is made timely. Thus, always strive to maintain the highest possible level given any circumstances, as it can help secure loans at favourable terms whenever a financial need arises.
When situations come knocking on our doorstep, an immediate cash requirement is needed. This is where relying upon an established track record can help save you from an unwanted financial crisis. Also, high credit scores allow one to take advantage of favourable conditions and strong histories with creditors to ensure that a person gets a loan when required.
Credit card companies favour people with high scores because they tend to have more cash flow and are less likely to default on payments. As such, excellent credits open doors towards receiving offers from some of the best providers in business who offer rewards programs which extend beyond what any ordinary consumer could ever hope to enjoy with a free credit score.
Financial institutions rely heavily upon individuals' records to accurately assess the risk associated with lending them capital for their business growth. Thus highlighting the importance of maintaining good standing within the community through regular, timely repayments made to various creditors.
Read More: Top Factors that Affect Your CIBIL Score
How much CIBIL score is good comes with a lot of myths. Knowing your CIBIL score to keep good credit health is good, as some myths may confuse you. One of these myths is that self-checking the CIBIL score reduces it. On the contrary, inspecting your scores is viewed as a soft inquiry and has no impact on your credit rating. Another mistaken belief is that closing old credit accounts will enhance your score. But those closures may shorten the duration of your credit history while increasing the likelihood of higher debt usage and, hence, a decrease in rating.
Others believe that making minimum payments on their credit cards will keep their scores high. Although paying minimums helps avoid late fees, it increases an individual's utilization rate, which can eventually hurt one's ranking. Moreover, many think that having a higher income ensures a good CIBIL score. Income does not directly affect your credit score; timely payments, credit utilization, and even the length of your credit history matter more.
Read More: How to File a Complaint for Your CIBIL Score
Maintaining a healthy mix of property is very important for a strong CIBIL score or overall financial well-being. A mix of credits refers to different types, such as mortgage loans, personal loans, car loans, and other card services like visa cards. Having diversified credits shows lenders that you can handle different forms responsibly.
A balanced combination of different debts could be positive for someone's CIBIL rating by showing they are capable of managing various types of credit, such as revolving loans (credit cards) alongside installment loans (e.g., auto/personal loans).
Understanding how much CIBIL score is good for a credit card is also vital. However, caution should be exercised when dealing with these kinds of accounts because over-reliance on one type or too much borrowing could ruin them as far as ratings are concerned. Therefore, ensure that there is a borrowing mix that will make you look like a responsible borrower without straining your finances.
Therefore, it is advisable to keep checking and maintaining a good credit combination to build a strong credit profile. Possessing an assortment of loans helps boost your financial security and flexibility by proving solvency.
Read More: 700 Credit Score? Discover the Best Credit Cards Just for You
To get a good credit score within six months, follow the below-listed steps for knowing how much CIBIL score is good:
1. Timely Payment: Making timely payments is crucial to securing a healthy credit score. Ensure that you do not default on any of your bills, such as credit card charges, power and water bills, and loans. You can do this by setting up automatic transfers or using reminders.
2. Reduce Your Debt: A high debt or personal loan credit score outstanding can impact your credit score. First, focus on paying off any remaining credit card and loan balances. Try starting with the high-interest debts first, if possible. Reducing the total amount of debt will decrease the credit utilization ratio, which is a large factor in determining how much weight gets placed upon a single piece of information by a person.
3. Keep Cards Open Over Time: Credit history length impacts credit scores. Even if they are not being used, try keeping old ones, as they may benefit from the credibility scores in the long run. Closing these accounts will reduce the length of one's credit history, thus possibly lowering his/her scores. Make sure to have a few aged accounts so that all longer financial records can be demonstrated.
4. Avoid Credit Applications: To apply for a new line of credit, an inquiry is marked that lowers the score temporarily, according to FICO Scorer. Multiple hard inquiries within a short period are more dangerous than one would think. Too often, people apply for many new credit cards or get approved or even decline their loan applications
5. Increase Credit Limit: If the card's issuer ever offers to increase its limit, go ahead and accept it. With more space available within one's borrowing limit, this approach decreases one's usage percentage, thereby decreasing one's chances of being suspected of fraud (Credit Card Insider).
Read More: How is your credit score calculated?
You should know and handle your CIBIL rating if you want to get good loans or credit card terms or know exactly how much CIBIL score is good. Among other things, a high credit score makes it easy to qualify for financing and attracts benefits like low interest rates, cheaper insurance premiums, and more rewarding opportunities. Paying on time, borrowing responsibly and managing debt well are ways to maintain a good credit score. It may be beneficial for beginners in borrowing money; for example, nineteen-year-olds who have just started using credit facilities or those who do not have a positive borrowing history yet can begin with a student or secured cards while striving towards building their ratings positively.
On the other hand, individuals who are already established need only track their expenditures closely without getting into too much debt while at the same time understanding the difference between debit and prepaid cards better to improve their financial health status. Better financial literacy and being proactive about such matters will, therefore, enable us all to achieve healthy financial positions, thereby exposing ourselves to more improved economic opportunities around us—which is why we must stay awake financially!
Can having too many credit accounts negatively impact my score?
Yes, having too many credit accounts can lower your credit score, mainly if you don't handle them properly.
Should I review my credit history often to ensure it's good?
Reviewing your credit record, including your credit mix, at least once a year is brilliant. You may make necessary modifications by regularly monitoring your credit utilization, account status, and general credit health.
If my CIBIL score is low, what should I do?
If your CIBIL score is low, improve your credit conduct by making on-time bill payments, lowering your balance due, minimizing credit use, and avoiding pointless credit queries.
What is a CIBIL score and a credit report?
A credit report is a comprehensive summary of your credit history, accounts, payment history, and records; a CIBIL score is a numerical representation of your creditworthiness. Your credit report contains information that determines your score.
If there is an error on my CIBIL report?
If you discover a mistake on your report, you should register a dispute with CIBIL. Provide CIBIL with the supporting documents for your claim, and it will review it and fix any errors, usually in 30 to 45 days.
If my income is high, will my CIBIL score be high?
No, a high income doesn't guarantee a high CIBIL score. The score depends on your credit repayment and history instead of your income level.
If I take too many loans, will this affect my CIBIL score?
Any kind of loan can impact your CIBIL score, but they all do it differently. Instalment loans, for instance, might show your ability to pay off long-term debt, while credit cards and other loans show how credit accounts may impact your credit utilization ratio.
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