How a good credit score can benefit borrowers

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Your credit score decides if your next credit card or loan application is approved or rejected. A good credit score not just ensures a hassle-free approval, it also helps you negotiate rate of interest with the lender.

Here’s a look at key advantages borrowers are entitled to if they have a good credit score:

What is credit score?

Credit score, is statistical analysis of your credit worthiness, or your ability to repay debt. It is usually expressed as a number based on the person’s repayment history. The Reserve Bank of India has authorized four credit information companies — Credit Information Bureau Limited (CIBIL), Experian, Equifax and Highmark – to calculate credit score. CIBIL credit score, most popular in India, ranges from 300 to 900, with 900 being the best score. As per CIBIL website, any score above 750 is considered to be good.

How is credit score determined?

30% of your credit score is determined by your repayment history, while 25% is determined by your loan portfolio. Another 25% is determined by your credit exposure and remaining 20% on how you’ve utilized the funds.

Benefits of a good credit score:

• It helps you get loan at cheaper interest rates. Credit report has your complete loan history.
• If you have a good repayment history, you can easily get loan sanctioned as per your requirement. Those with a poor credit score can borrow a limited amount which could be less than their requirement.
• Those with a good credit score can get best deals and offers on credit cards like cash back offers, waiver on processing fee and pre-approved loans among others.
• Maintaining a good credit score makes you eligible for a higher borrowing limit.