In this credit revolving world, its important know the basics. Credit score and credit report are two main aspects you need to understand. It’s also the difference you need to understand about both. They are definitely integrated. But not same.
A credit score is a three digit number between 300-900. A credit score is a number of the result of how well you maintain the credit you have borrowed. There are 2 things which come with the credit. Loans you have taken and the credit card you possess. How responsibly you repay these would determine your credit.
Its also important know the range. If your score between 300-500 is considered bad. 500-750 is an average score. Anything above 750 is considered good. The score below 750 is the red zone. If your score is in that range, it becomes difficult for you to get any credit. Even if you get, you have to go through a lengthy process of various verifications, personal discussions, reasons of why you have this score if you have made any defaults and they were willful or with some genuine financial crunch. With that score, you also have to pay more amount of rate of interest on the loans you take compared to if you have a score which is 750+. In such case, work on your credits and try improving it. Else if you want to take a loan, you have to take a loan with bad cibil score which will shade few more cash from your pocket.
If you have not taken any loans till date or you do not have any credit cards, you are considered a no history customer. Try building the score by taking a credit card or a small loan. In case you do not get an unsecured loan which is a personal loan or a business loan or normal credit card, try getting secured credit which consists of home loan, gold loan, loan against property or a secured credit card.
Your credit score is determined by following 5 things.
1. Payment History
2. Amount owed
3. Types of credits
4. Length of credit history
5. New credit
There are 4 bureaus who gives the credit score. Transunioun CIBIL, Experian, Equifax and CRIF Highmark are the four different bureaus in India which offers score. The different bureau has different weightage on determining your score. But it is made from these factors only. There can be 50 points difference in the different bureau’s scores.
Try patiently on all these factors and your score will never dip. It is not rocket science to understand these factors.
Credit Report is the detailed information of your personal information’s. It consists of your credit score, details of how your repayment records, your name, phone number, PAN number, inquiries you have made.
It also consists of how you replay. The installment details, all the credits you have taken till date. When have you made the payments, which all banks you have applied for the loans at? Just like the report card or score card you get after giving exams. It is advisable to check your credit report twice a year in order to stay updated. It will give an understanding if there is any requirement to work on any aspect which might go wrong. Also, if it is reflecting any transaction you have not made. Make sure you clear all the factors which might affect your score and take it down.
Be a responsible payer, try not to overdo anything. Like not use credit card upto its maximum limit, miss a payment or make numerous inquiries in short span. You can stay credit healthy and know the places which need improvement. Work on them. A better credit score will result in better credit report and will make it easier for you to acquire any loan on lesser interest rate!