Credit Score, a term that has to be in the mind while opting for a loan. It can be for anything – for a marriage, for higher studies, house maintenance, and vacation, to pay off other debts or for buying a house. Let’s take a look at a few of the things you need to bear in mind and follow before your dream shapes up.
What is a Credit Score?
A credit score number ranges from 300-900 and reflects a borrower’s worthiness to maintain good credit and reputation with bankers. The higher the score the greater chances of pleasing the lender. Thus, a credit score is based on one’s credit history that includes a number of open accounts, levels of debt, repayment tendencies and other factors. So, bankers or lenders use credit scores to assess the potential that the borrower will repay loans on time.
How Credit Score Works?
Your financial life purely depends on your credit score. It has the power that allows a lender’s decision to either to offer credit or reject your application. If you score below 650, you’ll come under the category of subprime borrowers, a person who is at a high credit risk and is targeted as a low credit scorer. They tend to have a thin credit history. Hence, lenders find it difficult to decide credit reports and sanction loan amounts.
Reciprocally, a credit score check of 700 or above is good enough and often results in a borrower receiving a lower interest rate. Credit Scores greater than 800 are eligible for loan. They are eligible for a loan. Let’s have a look how every creditor defines credit ranges for a credit score.
- Excellent: 800 to 900
- Very Good: 740 to 799
- Good: 670 to 739
- Fair: 580 to 669
- Poor: 300 to 579
How is your score calculated?
Five factors are evaluated while calculating a credit score:
– Payment history
– Total amount owed
– Length of credit history
– Types of credit
– New credit
The payment history counts for 30-35% of a credit score and reflect whether a borrower pays their dues on time. The total amount owed counts for 25%-30% and takes into account the percentage of credit available to a person that is currently being used.
The type of credit used counts for 7%-10% of a credit score and shows if the borrower has a mix of installment credit which includes car loans or home loans and credit cards. New credit also counts for 10%, and it factors in how many new accounts a person has.
How to Improve Your Credit Score?
Here are some ways a consumer can improve their credit score:
- Pay your bills on time: 6 months of on-time payments is required to see a difference in your score.
- Up your credit line: If you have credit card accounts, call and inquire about a credit increase. Clix Capital, your one-stop-shop has the best solution for all your credit score queries, credit increase and loan support.
- Don’t close a credit card account: If you are not using a certain credit card, it is best to stop using it instead of closing the account.
The Bottom Line
Your credit score can cost or save you a lot of money in your lifetime. A higher score can give you lower interest rates, meaning you will pay less for any line of credit you take out.
For any more queries or questions about how credit scores work and to know more about how Clix Capital can help you in getting a loan, feel free to write to us at [email protected] or call us on 1800-200-9898.