What is a Good Credit Score to Get a Loan in India?

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A credit score is a three-digit code that helps to assess the creditworthiness of the borrower. Credit scores given by TransUnion CIBIL range between 300 and 900. The higher the credit score, the better is your creditworthiness in terms of repayment of your borrowings, total borrowings and credit mix, credit history, and credit utilisation ratio.

Credit scores analyse your creditworthiness and credit discipline. It is a snapshot of the number of your hard credit enquiries. It also tells the total amount of credit you owe to various banks and whether you are paying off your loans and instalments promptly.

CIBIL credit scores can be improved by a disciplined manner of paying off loans and making repayments. If you are taking loans from multiple sources at the same time and overextending the use of your credit card and unsecured borrowings, your credit score may fall. 

CIBIL credit scores are divided into five different bands:

  • NA/NH: It indicates that you have no credit history and haven’t borrowed any loans.
  • 350–549: It indicates your history as a defaulter of late payments on loans and credit card bills. It is a bad credit score.
  • 550–649: It indicates that you are struggling to pay off your credit card bills and loans. It makes you eligible to take loans but at high interest rates. 
  • 650–749: It indicates that you have a decent credit history. Your loan applications will receive more favourable consideration from lenders. 
  • 750–900: It indicates that you have been clearing your dues and paying credit card dues in time. You will be rated as a low-risk borrower by lenders and considered for favourable terms such as larger loan amounts and more competitive interest rates. It is an excellent credit score
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Who are the credit rating agencies or credit bureaus?

TransUnion CIBIL, Experian Credit Information Company of India Pvt. Ltd., Equifax Credit Information Services India Pvt. Ltd., and CRIF High Mark are some of the credit rating agencies in India. Credit bureaus analyse credit data and create credit scores. The entire gamut of loan and credit cards include all credit taken, the total number of loans and overdraft facilities, including the repayment history and number of unsecured borrowings. This data is collected and analysed to arrive at a numerical score. The credit score encapsulates the entire borrowing and repaying history in a single glance.  

Free credit scores or free credit checks 

CIBIL provides one credit report and summary every year at zero charges. It allows you to do a free credit check and see where you rank in terms of creditworthiness. You can access any financial website for a free credit check. Just input your first name, last name, PAN number, mobile number, and complete address, and your credit score will be generated for free.

Advantages of a good credit score

If you have a good credit score, you will receive the following benefits:

  • Higher potential for the approval of new loans
  • Favourable terms with lower interest rates and repayment periods which results in lower loan amounts and shorter repayment times
  • Higher loan amounts from lenders at competitive rates
  • Pre-approved loan offers with attractive rates of interest and flexible loan tenors structured according to your convenience

How to improve your credit score

You can take simple steps for this purpose:

  • Repay your Equated Monthly Instalments (EMIs) and credit card bills on time.
  • Reduce your overall borrowing by 30–35%.
  • Get a healthy mix of unsecured and secured credit.
  • Reduce defaults in loan repayments and credit card payments.
  • Reduce the number of your loan applications. Multiple loan applications can also reduce your credit score.
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Get your free credit score check today and start working to make it better.

 

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