Credit score plays a crucial role in determining loan approvals, interest rates, and terms of your loans. It is a three-digit number that represents your creditworthiness and indicates how likely you are to repay your debts on time.
Shriram Finance understands the importance of credit scores in the lending process, and this is the reason we offer a wide range of credit solutions. Some of these key solutions include loans for commercial vehicles, two-wheelers, cars, homes, gold loans, personal finances, and small businesses. Additionally, we provide fixed deposits and recurring deposits. Check them out now.
What are the Credit Score Ranges?
Credit scores are designed to assess the likelihood of you repaying your debts. Lenders and creditors use these scores as one factor in deciding whether to offer new credit and determining the interest rates and other terms for that credit. In credit score numbers, your scores may range from 300 to 850. Within this range, there are five main categories: poor, fair, good, very good, and excellent. To maintain your creditworthiness, your credit score must be within a good credit score range.
Understanding Different Credit Score Ranges
1. Poor (300-579)
Individuals with scores in this range often have difficulty being approved for new credit. If you find yourself in this category, it is crucial to take steps to improve your credit scores before securing any new credit.
2. Fair (580-669)
This range includes individuals who are often considered "subprime" borrowers. If your credit score is in this bracket, lenders will categorise you as higher-risk borrowers. You may face challenges while qualifying for new credit if your credit score chart displays anything between 580 and 669.
3. Good (670-739)
Lenders generally consider individuals with scores of 670 and above as acceptable or lower-risk borrowers. Maintaining a good credit score mean range will increase your chances of approval for additional credit.
4. Very Good (740-799)
Individuals in this range have demonstrated a history of positive credit behaviour. If you are in this category of good credit score range, it will be relatively easier for you to get approval for additional credit.
5. Excellent (800-850)
This is considered as the best credit score range. Individuals with scores in this range are considered low-risk borrowers. You will not only secure a loan easily but will also be eligible for better interest rates and terms. You must always strive to maintain such a good credit score range.
How is my Credit Score Calculated?
Credit scores are calculated based on information found in your credit report. Factors that influence your credit scores include payment history, types of credit accounts, length of credit history, and credit utilisation rate.
Different lenders and credit reporting agencies may use various scoring models to calculate your credit scores. Some models prioritise payment history, while others place importance on the types of credit. Additionally, your scores may vary depending on which credit reporting agency provides them.
What Factors Affect Your Credit Score?
1. Payment History
The most significant factor affecting your scale of credit ratings is your payment history. Making on-time payments consistently helps maintain a positive payment history.
2. Credit Utilisation Ratio
The amount of available credit you are using, known as the credit utilisation ratio, also impacts your score. It is important to keep this ratio low by saving some components of your available credit limits.
3. Length of Credit History
The length of time you have held various types of credit accounts affects your score. Maintaining a longer credit history demonstrates responsible borrowing behaviour. It also shows rising graphs in your credit score chart.
4. Types of Credit Used
Having a mix of different types of loans and borrowing avenues positively influences your score. It shows that you can handle different types of financial obligations responsibly.
5. New Credit Inquiries
Opening multiple new accounts simultaneously can negatively impact your score. It is advisable to avoid excessive inquiries for new credit unless necessary.
Impact of Credit Score Ratings
Credit scores play a significant role in various aspects of personal finance. Having good credit scores can lead to lower interest rates, better loan terms, and higher credit limits. In contrast, poor credit scores may result in higher interest rates, limited access to credit, and difficulty in obtaining loans.
Why is it Important to have a Good Credit Score?
Maintaining a good credit score offers several benefits. It provides access to favourable loan terms, lower interest rates, increased chances of loan approval, and enhanced borrowing power. A good credit score reflects responsible financial behaviour and establishes trust with lenders.
How to Improve Your Credit Score?
Improving your score requires time and responsible financial choices. Here are some actionable tips to help you boost your scores:
- Pay Bills on Time: Consistently making payments by their due dates shows responsible credit behaviour.
- Keep Credit Utilisation Low: Aim to utilise only a small portion of your available credit limits to score well on the credit score chart.
- Maintain a Mix of Different Types of Credit: Having a balanced mix of loans and lines of credit demonstrates responsible borrowing behaviour.
- Regularly Review and Correct Errors on Your Credit Report: Monitoring your credit report ensures its accuracy and allows you to promptly address any discrepancies.
- Avoid Opening Multiple New Accounts Simultaneously: Opening too many new accounts within a short period can negatively impact your score.
Know What Affects Your Credit Scores the Most
Payment history and credit utilisation ratio have the most significant impact on your credit score. Ensuring timely payment of bills and maintaining a low credit utilisation ratio are two critical factors for improving your scores.
What are the Pros of Having a Good Credit Score?
Having a good credit score opens doors to better financial opportunities. It leads to improved loan terms, lower interest rates, higher borrowing power, and an overall enhancement in financial well-being.
Credit Information Companies (CICs) in India
In India, Credit Information Companies (CICs)/ credit bureaus such as Experian, Equifax, and CRIF High Mark play a vital role. These companies collect credit-related information and generate credit reports and scores for individuals. CRIF score range, Equifax credit score range, and Experian credit score range are the names of credit scores offered by these companies, respectively. By obtaining their credit reports from these CICs, you can review your creditworthiness and take the necessary steps to improve your scores.
Conclusion
In conclusion, understanding credit score ranges is crucial for anyone seeking financial stability. Maintaining a good credit score offers numerous advantages, including better loan terms, lower interest rates, and improved borrowing opportunities. Shriram Finance recognises the significance of good credit scores and provides various credit solutions to cater to different financial needs. Check your business credit score range today and take steps to improve it if necessary; it is the first step towards achieving your financial goals.
We offer loans for commercial vehicles, two-wheelers, cars, homes, gold, personal finances, and small businesses. Additionally, we provide fixed deposits and recurring deposits to help individuals grow their savings. If you need a business loan, click here.
