{"id":9544,"date":"2020-03-19T08:30:17","date_gmt":"2020-03-19T03:00:17","guid":{"rendered":"https:\/\/swaritadvisors.com\/learning\/?p=9544"},"modified":"2020-06-19T12:36:55","modified_gmt":"2020-06-19T07:06:55","slug":"insights-of-credit-score-and-importance-to-maintain-it","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/learning\/insights-of-credit-score-and-importance-to-maintain-it\/","title":{"rendered":"Insights of Credit Score and importance to maintain it"},"content":{"rendered":"\n<p class=\"has-drop-cap\">The economic growth of a nation is directly proportional to the development of its financial sector. An adequate number of lending and borrowing facilities represents a stable nation. Loans have always been a pivotal source of funding for every individual who is in a need of funds. Several financial institutes like <strong>banks and NBFC\u2019s<\/strong> provide an array of credit or loans at a moderate rate of interests. The lending entities consider numerous factors to evaluate the prospect that an individual shall repay the loan in a stipulated timeframe. One such important factor is the <strong>Credit Score of a borrower<\/strong>. This write-up will accentuate the insights of <strong>Credit Score<\/strong>.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3a77043f205\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3a77043f205\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/learning\/insights-of-credit-score-and-importance-to-maintain-it\/#What_is_a_Credit_Score\" title=\"What is a Credit Score?\">What is a Credit Score?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/learning\/insights-of-credit-score-and-importance-to-maintain-it\/#An_insight_into_the_functioning_of_Credit_Score\" title=\"An insight into the functioning of Credit Score \n\">An insight into the functioning of Credit Score \n<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/learning\/insights-of-credit-score-and-importance-to-maintain-it\/#List_of_Credit_Rating_Agencies_in_India\" title=\"List of Credit Rating Agencies in India \n\">List of Credit Rating Agencies in India \n<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/learning\/insights-of-credit-score-and-importance-to-maintain-it\/#Tips_to_maintain_a_good_Credit_Score\" title=\"Tips to maintain a good Credit Score\">Tips to maintain a good Credit Score<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/swaritadvisors.com\/learning\/insights-of-credit-score-and-importance-to-maintain-it\/#Insights_of_Credit_Score_myths\" title=\"Insights of\nCredit Score myths   \n\">Insights of\nCredit Score myths   \n<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/swaritadvisors.com\/learning\/insights-of-credit-score-and-importance-to-maintain-it\/#Conclusion\" title=\"Conclusion  \">Conclusion  <\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_a_Credit_Score\"><\/span>What is a Credit Score?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Credit Score refers to a statistical number which reckons the creditworthiness of a person based on his\/her credit and repayment history. Banks and other<strong> financial institutes use Credit Scores<\/strong> to estimate the amount of potential risk involved in lending the funds to a particular person. It also helps to determine the interest rate, qualified applicants for loans and credit limits.  <\/p>\n\n\n\n<p>Basically, a <strong>Credit Score indicates a three-digit number<\/strong> which falls within the scale of <strong>300-900<\/strong> wherein, 900 remains the highest. One must always emphasize on maintaining a good Credit Score that reaches close to 900. People with a good Credit Score can yield several benefits during the time of taking a loan or <strong>applying for a Credit card<\/strong>. However, a low Credit Score defames your reputation and implies that you are not a responsible borrower who is inefficient in repaying the borrowed money.   <\/p>\n\n\n\n<p>Apart from financial entities, many\norganizations deploy the technique of Credit Score, such as insurance\nand mobile phone Companies, Government Departments, landlords etc. &nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"An_insight_into_the_functioning_of_Credit_Score\"><\/span>An insight into the functioning of Credit Score \n<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Credit ratings can make or break your financial position. It is indispensable to maintain the <strong>Credit Scores to avail loans at lower interest rates<\/strong>. Banks or lenders usually impose a higher interest rate to the subprime borrowers as compensation for the higher risk of lending. The subprime borrowers significantly those people whose <strong>Credit Score is below 640<\/strong> are required to repay loans on shorter terms or require a Cosigner for loan approval.<\/p>\n\n\n\n<p><em><strong>Let\u2019s perceive the different Credit Score ranges and what they stand for:<\/strong><\/em><\/p>\n\n\n\n<ul><li><strong>NA\/NH:<\/strong>&nbsp;A Credit Score depends upon a person\u2019s credit history. If an individual doesn\u2019t have any credit history, then his credit report will state that his <strong>Credit Score is NA<\/strong> (Not Applicable) or NH (No History). <\/li><li><strong>300 -549:<\/strong>&nbsp;A Credit Score that lies between the <strong>range of 300 to 549<\/strong> is considered as bad. A person with such a score is entitled to be an irresponsible borrower who has unpaid dues and did defaults on the payments. <\/li><li><strong>550-649:<\/strong>&nbsp;This Credit Score is regarded as average with a scope of improvement.  <\/li><li>&nbsp;<strong>650-749:<\/strong>&nbsp;The lenders consider a <strong>Credit score of 650 to 749<\/strong> as good. Therefore, the lenders easily offer loans or credit cards to the borrowers with a good rating while they might not get the leverage to negotiate a great deal. <\/li><li><strong>750-900:<\/strong>&nbsp;An individual with this <strong>Credit Score<\/strong> often gets loans on cheaper interest rates. Moreover, it also provides additional powers to negotiate a deal for Credit cards with better rewards.&nbsp; <\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"List_of_Credit_Rating_Agencies_in_India\"><\/span>List of Credit Rating Agencies in India \n<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A Credit Rating Bureau is an organization that assesses the creditworthiness of an individual and estimates his ability to repay the loan amount. Credit Rating Agencies provide a <strong>Credit Score of individuals<\/strong> that helps financial institutions or banks to determine whether to sanction a loan to a person based on his financial history or not. India has six <strong>Credit Rating Bureaus<\/strong> that streamline the lending procedure by providing <strong>insights of Credit Score<\/strong> which are as follows:<\/p>\n\n\n\n<ul><li>CRISIL\n\tor Credit Rating Information Services of India Limited\n\t<\/li><li>ICRA\n\tLimited\n\t<\/li><li>SMERA&nbsp;(Small\n\tand Medium Enterprises Rating Agency of India)\n\t<\/li><li>CARE\n\t(Credit Analysis and Research Limited)\n\t<\/li><li>Brickwork Rating\n\t<\/li><li>India\n\tRatings and Research Pvt. Limited\n<\/li><\/ul>\n\n\n\n<p>SEBI (Securities and Exchange Board of India) authorizes and regulates Credit Rating Agencies in India under <strong>SEBI Regulations, 1999 of SEBI Act<\/strong> <a href=\"https:\/\/www.sebi.gov.in\/legal\/regulations\/jul-1999\/sebi-credit-rating-agencies-regulations-1999_18745.html\">[1]<\/a> , 1992. Credit Rating Bureaus analyze the credit history of the individuals and assign Credit Scores to them.  <\/p>\n\n\n\n<p><div class=\"shadow6\">Credit\nRating Agencies hold the authority to rate State Companies,\nNon-Profit Organizations, countries, special purpose entities and\nLocal Government Bodies. Such Agencies prepare Credit Score Report\nbased on many factors like debt type, financial statements,\nlending-borrowing history, past loan repayment behaviour, repayment\ncapability etc.<\/div><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Tips_to_maintain_a_good_Credit_Score\"><\/span>Tips to maintain a good Credit Score<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Now you must have understood the\nimportance of a good Credit Score. Here are the ways to maintain it:<\/p>\n\n\n\n<ul><li><strong>Pay\n\tbills on time:&nbsp;<\/strong>Though in the hustle and bustle of\n\tthe daily regime, one can forget to pay the bills on time, it can\n\thave an adverse effect on the Credit Score. Thus, aim to pay your\n\tbills of utilities, mobile phone service, rent before the\n\tdeadline.&nbsp;&nbsp;\n\t<\/li><li><strong>Manage\n\tCredit Utilization Ratio: <\/strong>It is yet another significant\n\taspect to improve your Credit Score. It is the\n\tpercentage of your total outstanding credit balances divided\n\tby the sum of your credit limits.&nbsp;It\n\tis advisable to keep a ratio under 30%. \n\t\n\t<\/li><li><strong>Be\n\tvigilant while closing a Credit Card: <\/strong>While applying for\n\ta new Credit card, you may feel to close your old one due to some or\n\tthe other reasons. However, it is prudent not to close an old Credit\n\tcard that you have been using for a long time since it provides your\n\tfinancial history. Additionally, one must keep the existing Credit\n\tcard active by doing small transactions once in a while. \n\t\n\t<\/li><li><strong>Do not withdraw cash from\n\tyour Credit card<\/strong>: It is one of the most common mistakes that we\n\tcommit without apprehending the aftermath that will directly impact\n\tthe Credit Score. When you use your Credit card to withdraw some\n\tcash from ATM or Bank, it is considered as\n\ta&nbsp;cash advance. Hence,&nbsp;you end up paying a high-interest\n\trate that ultimately affects your credit history.\n<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Insights_of_Credit_Score_myths\"><\/span>Insights of\nCredit Score myths   \n<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>There are various myths and\nfallacies associated with Credit Scores that mislead borrowers. Take\na closer look at some of the myths related to Credit Score: \n<\/p>\n\n\n\n<ul><li><strong>Credit Score infringes your personal details<\/strong>: It is misinterpreted that when a Credit Rating Agency estimates the Credit Score, it fetches additional information of a person than financial history whereas RBI approved Credit Bureaus only scrutinizes your borrowing history like credit accounts, outstanding debts to evaluate your Credit Score.   <\/li><li><strong>Banks solely lend based on the Credit Score<\/strong>: Another common myth is that banks or <strong><a href=\"https:\/\/swaritadvisors.com\/nbfc-registration\">NBFC\u2019s<\/a><\/strong> only examines a Credit Score to reject or <strong>accept a Loan Application<\/strong>. While Credit Score is an important source to determine the creditworthiness of a person, yet there are several other factors such as Debt-to-Income Ratio, employment history, etc. Moreover, banks also have their underwriting policies. <\/li><li><strong>A college degree is equivalent to a higher Credit Score:<\/strong> Despite many other fallacies, it remains the most baseless myth.  There is no connection between educational degree and credit ratings.  As long as one possesses stable income with a feasible Debt-to-Income Ratio, the person\u2019s designation does not have any impact on the Credit Score. <\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion  <span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><div class=\"shadow4\">This document may have served as an eye-opener to you. The insights of Credit Score have given a comprehensive knowledge of its importance and ways to improve it. <strong>Credit Score<\/strong> is a chief factor that can either enable you the loan or leads to rejection, so it\u2019s better to maintain it.  <br><br>If you need any financial guidance related to NBFCs, banks or lending institutions, look no further than <strong><a href=\"https:\/\/swaritadvisors.com\/\">Swarit Advisors<\/a><\/strong>. We are a Financial and Legal Consultancy that facilitates end to end solutions related to Legal and Finance matters.  <\/div><\/p>\n\n\n\n<p class=\"text-left\"><b>Read, Also<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/learning\/banks-vs-nbfcs\/\">Difference Between Banks v\/s NBFCs<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The economic growth of a nation is directly proportional to the development of its financial sector. An adequate number of lending and borrowing facilities represents a stable nation. Loans have always been a pivotal source of funding for every individual who is in a need of funds. Several financial institutes like banks and NBFC\u2019s provide [&hellip;]<\/p>\n","protected":false},"author":10,"featured_media":9545,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[660],"tags":[659],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/9544"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/comments?post=9544"}],"version-history":[{"count":6,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/9544\/revisions"}],"predecessor-version":[{"id":11129,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/9544\/revisions\/11129"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/media\/9545"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/media?parent=9544"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/categories?post=9544"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/tags?post=9544"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}