Every individual is liable for either improving or destroying their life. One of the greatest signals towards the implications of financial security is the awareness of one’s own credit score.
What Banks think about Credit rating?
In the present economic scenario, every individual is dependent upon getting credit from very minor to the big financial need of life. With the financial options being available to everyone, one cannot resist availing credits to buy even a single smartphone.
However, every institution has its own criteria for a good or bad credit score. Lenders have kept all of the credentials standards high. Thus, it is very necessary to understand the whole scenario of good Loan credit score.
What is a Credit Score?
It is a financial rating of the borrower based upon the evaluation of his creditworthiness. The whole evaluation is done by the credit rating agency known as CIBIL in which they check the capacity of the debtor to pay back the loan availed.
One’s Credit score follows till his lifetime and thus his monetary decisions play a huge role in your life.
Know the distinction between Credit Score and Credit report:
It is very essential to be well informed about the detailed information shared in the fine print. However, people get, confused with the two phrases credit score and credit report.
Credit Score:
- It is basically a three-figure number that summarizes the whole credit history of the candidate.
- It is simply calculated by taking all of the details of your borrowings done in the past, history, repayment pattern, and default cases.
- It is taken in the range of 300 to 900. A score close to 900 is considered to be a disbursal case.
Credit Report:
- A Credit report is a detailed history of one’s credit information.
- The Credit report also includes information like balances, credit information, bankruptcies, personally identifying information, and inquiries.
What a Consumer must do?
A consumer must examine the credit even he is not in the regular activity of borrowing from banks.
It gets easier for him to identify all sorts of thefts and help him to protect his assets. He can easily qualify for a loan whenever he needs to take a loan for a financial emergency.
What Factor affects the Credit Rating report?
The following factors help credit rating agencies to make the report easily:
- Payment history: 35%
- Total Amounts Availed: 30%.
- Length of Credit History: 15 %.
- Type of Credit: 10 %.
Role of Payment History:
The borrower’s payment history is the game-changer as the major of the credit score depends upon it. Delayed payments and high credit card balances can have a great impact on your credit score.
Bad credit can also affect insurance premiums to employment opportunities for marriage.
Effect of Bad Credit on Insurance Premiums:
While getting insurance done for car and home, the credit score plays a vital role in the determination of premiums.
It is commonly referred to as Insurance factors that depend upon the credit score and other factors too.
With the help of a good score one avail good discounts on the premiums. On the other hand, a bad score can easily put down him into high premiums.
Effect of the Credit Score in the employment:
Employers also look at the credit score with full faith. As it binds them with the employee with full trust. Most of the utility companies like electricity phone and cable keep the credit score as part of their application procedure.
Hence it is very necessary to keep updated on its own CIBIL score to lead a peaceful financial life.
