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Though credit bureaus have been functioning in India since almost a decade and half, but a survey shows that almost more than 80% of the Indian population does not know about the existence of credit bureaus and a miniscule understand their credit reports. The awareness about the utility of credit report utility was also low. Being credit aware is a necessity to have a good credit score which in turn is of paramount importance if one wants to have access to borrowing through organized sector. Apart from this, being credit healthy ensures that one is financially healthy also, is not overleveraged and in some aspects could impact job prospects too. So if you want to know if you are credit aware then just go through the following questions we have for you.Do You Know what is Credit Score?
Some of you may have heard about the credit score also known as
CIBIL score (generally) but do you know what it is. The credit
score is a three digit number ranging on a scale of 300 to 900.
This number is calculated by considering various factors related to
loans, credit card and the repayment history of an individual. This
is a statistical tool that analyses historical data related to debt
and provides a rating or score based on that.
Is the Credit Score same as Credit Report?
While the credit score is three digit number, the credit report
(CIR: Credit Information Report) is a comprehensive document that
has information other than credit score and loan. The credit report
carries personal/professional/contact information, full details
about all loans, their type, status of a loan and its asset
classification, enquiries status, how old the debt is and so on.
Though only the information that is listed under the accounts
information head is used to calculate the credit rating, rest of
the information also comes in handy when assessing a prospective
What is Credit Score Important?
Do you know that if you were to go to any lender for a loan, the
first thing that they will do is access your CIR. If your credit
report is more than or equal to the threshold level which is
acceptable to them then only you go to next level else your
application is rejected outright. A CIR helps the lender assess the
risk potential a prospective borrower poses if he/she is sanctioned
a loan. Generally a score of more than 750 is acceptable for
sanctioning a loan and almost 90% of loans that are sanctioned are
for applicants who have a score of more than 700 though different
lenders may have different acceptance level.
Is a Credit Score Useful only for Sanctioning a
The utility of a credit score goes beyond the acceptance of the
loan application. A good score could help you save money by getting
you good deals on the loan interest rates, waiver of certain fees
by the lender and of course faster loan processing. A credit score
is also an indicator of the overall financial health of an
individual. In some cases a credit score could also come in handy
when applying for a job especially higher management and finance
What Impacts your Credit Rating?
There are basically five factors that impact the credit score of
an individual. The first is the repayment history; this is by the
most important factor and has a 35% share in the credit score
calculation. The next is credit utilization ratio which has a 30%
weightage in the score calculation. The other three factors are
loan tenure which contributes 15% to the score and loan enquiries
and credit mix (secured and unsecured loans ratio) each
contributing 10% to the rating.
Is Your Income Level got to do anything with the Credit
The credit score has no relation whatsoever with the income
level of an individual. A credit rating is only based only on the
treatment of debt; however small or large it may be. If one has
small regular transactions on a credit card which are paid
regularly and timely, it can lead to a healthy credit score. How
much one earns will not impact the credit rating.
Is CIBIL the only rating agency?
Though CIBIL is the most well known and the oldest rating
agency, it is not the only one. There are three other agencies that
rate individuals; these are Experian, Equifax and CRIF
Does no Credit Mean a High Credit Score?
No it does not! The idea of a credit rating is to assess how a
person is likely to treat his/her debt in future based on the
historical data. So no credit trail means no credit score,
generally a NA or NH is given to such an individual. This means
that either the person has no credit history or it is not old
enough to be rated.
Hopefully the above discussion will let you assess if you are
aware and if so how much about credit rating, its calculation and
its importance. If not so then hopefully we have been a little
We, at CreditVidya, believe in empowering you. Because we believe that knowledge is not only power but also gives you a sense of belonging. We believe in supporting the consumers by not being their crutch but as catalysts and enablers.
How to get your CIBIL credit score online ?
Want to improve your Cibil Score? Try our 'Score Builder'