what is the meaning of your credit score?

do you remember those childhood days when you anxiously awaited your scorecard at the end of each academic year? two digits (unless you scored 100%) summed up your educational performance for one full year! 
now that school is over, there are no more mark sheets to bother about for most of us. however, there is another scorecard that impacts your life in several ways, without you even realising.
credit score is an oft-repeated term you must have heard innumerable times. but what really does credit score mean is not something everybody understands.

understanding your credit score

simply put, your credit score is a three-digit number that reflects your creditworthiness and financial behaviour and is based on your credit report, which can be compared to your financial report card. 
in India, a person’s credit score ranges between 300 and 900, and an individual with a higher credit score is considered to be more creditworthy and financially responsible.

who calculates your credit score?

in case you are wondering, your credit score is based on your credit report, which is a record of all your financial transactions, including any debts, repayments, and utility bills, collected and maintained by various credit bureaus approved by the RBI. 
in India, there are four main credit bureaus, including the Credit Information Bureau India Limited or CIBIL, which was the first credit bureau to be established in India. the other three main credit bureaus in the country are Equifax, Experian and CRIF High Mark.

the importance of your credit score

in the simplest of terms, your credit score is a statistical number that represents your creditworthiness based on your credit history. thus, it is a mathematical expression of your financial behaviour and an essential metric for lenders to judge your creditworthiness by.
in general, a credit score of more than 700 is considered good and can make all the difference in securing approval for your credit applications. 

below are the top advantages of having a high credit score

quick loan approval: banks don’t want to risk their money, and prefer lending to financially disciplined borrowers. a good credit score means that you are responsible with your money and are likely to repay the loan, making you a good candidate for lending money.
low interest rate credit: if you have a high credit score, you can negotiate a lower interest rate with your lender because you will get competing offers from several banks. however, an individual with a low credit score may have his or her application rejected or obtain credit at a higher rate of interest.
higher borrowing capacity: besides your income, your credit score also impacts your borrowing capacity and those with higher credit scores can expect to borrow a larger amount of money as compared to someone with a low credit score. if you have a good score, you may also be offered better schemes and privileges on your credit card. 

now that you know the importance of a good credit score, here are some quick tips for maintaining a high score:

• pay all your bills on time, including your utility bills and debt repayments.
• close any inactive credit cards.
• reduce your debts through consolidation or increase your income if possible.
• don’t shop around for credit unnecessarily, as it impacts your score.
• keep your debt to income ratio low.

have you checked your credit score lately? if not, visit the CRED website and download your credit report for free.