Your credit score is a reflection of your creditworthiness and substantially impacts your ability to secure loans and qualify for credit cards. You must differentiate between an average credit score and an excellent credit score range.
Your credit score is scored on a scale that ranges between 300 and 850. The average credit score hovers around 710, which falls within the good range. If you are curious about how credit scores vary with age, consider the difference between an average credit score at ages 18 and 21.
In this article, you will get a comprehensive guide to understanding everything about an average credit score, besides learning effective ways to improve your credit score. Since credit bureaus may use different scoring models and data received from the lenders to calculate your credit score, it may be possible that your average Experian credit score may slightly differ from the average Transunion credit score or average Equifax credit score.
Responsible borrowing and timely repayments positively affect your score and build a strong credit history. Shriram Finance, a trusted partner in your journey for financial management, understands the importance of both average and good credit scores. You can choose from a variety of loans offered by us including business loans, personal loans, commercial vehicle loans, used car loans, two-wheeler loans, and gold loans. If you need a personal loan, check the details and apply here.
How to Check Your Credit Score?
Monitoring your credit score is essential for maintaining good financial health. You can access your credit score through various methods:
- You can obtain a free credit report from each of the three major credit bureaus, including Experian, Equifax and Transunion.
- Numerous online services offer free credit score tracking, making it easier to stay informed.
Why Do Lenders Check Your Credit Score Before Approving Your Loan?
Lenders assess your credit score to evaluate the risk associated with lending you money. Here is why your credit score matters to lenders:
- A high credit score implies responsible financial behaviour and a lower likelihood of loan default.
- A low credit score suggests a higher risk for lenders, potentially leading to loan denials or higher interest rates.
What Are the Factors That Affect Your Credit Score?
Understanding the factors that influence your credit score empowers you to manage it effectively. These factors include various credit score components:
- Payment History: Your payment history matters as timely payments for loans and other bills on time have a positive impact on your score.
- Credit Utilisation Ratio: Carefully managing your credit card balances is crucial for a healthy score. You must keep your credit utilisation ratio low to improve your credit scores.
- Credit History Length: A longer credit history length generally leads to better credit scores.
- Credit Mix: A diverse credit mix can be beneficial and shows your ability to efficiently manage various types of credit accounts.
- New Credit Applications: More number of applications for different credit accounts within a short timeframe can affect your score negatively.
How Does Outstanding Debt Affect Your Credit Score?
Outstanding debt plays a significant role in your credit score. High credit card balances and maxed-out credit cards can increase your credit utilisation ratio, which, if too high, can negatively affect your score.
What Is a Good Credit Score to Avail of a Personal Loan?
The definition of a good range of credit score can vary with lenders. However, a score above 670 by the Centre for Research in International Finance (CRIF) is considered a good credit score. With such a score, you are likely to qualify for personal loans with favourable interest rates. Let us understand other related aspects:
- A good credit score opens doors to more loan options and better interest rates.
- Responsible financial behaviour is rewarded with improved credit scores.
What Is a Good Credit Score to Avail of a Business Loan?
For business loans, lenders often require a higher credit score. A CRIF score above 700 is typically considered good for securing business loans with competitive loan terms. You must take note of the below pointers while securing business financing:
- A good credit score can be a valuable asset when seeking business loans.
- Lenders rely on credit scores to assess the creditworthiness of your business.
What Is a Good Credit Score to Avail of a Home Loan?
Home loans are substantial financial commitments, so lenders prefer borrowers with excellent credit score range. A CRIF score of 750 or higher is generally considered excellent and will help you secure a favourable interest rate on your mortgage. Some points to consider while sending your home loan application:
- A higher credit score can lead to lower mortgage interest rates.
- An excellent credit score range is often a prerequisite for the best home loan deals.
How to Maintain a Good Credit Score?
Maintaining a good credit score is vital for financial stability. The credit score maintenance strategies mentioned below will help you maintain a favourable credit rating:
- Consistently make on-time payments.
- Reduce credit card balances and manage credit responsibly.
- Keep old credit accounts open, as they contribute positively to your score.
How to Get a Loan Despite a Poor Credit Score?
It is possible to secure a loan without fulfilling the credit score criteria. To achieve this, you can explore options like secured loans, opt for co-signers in your loans, or find specialised lenders who work with individuals having lower credit scores. However, you must be prepared for higher interest rates and stricter loan terms. Below we highlight some options for securing loans with poor credit scores:
- Secured loans may require collateral but can be a good option for people having poor credit scores.
- Co-signers with good credit scores can help you secure loans, even if you have a low credit score.
- Specialised lenders can help borrowers who otherwise do not qualify for loans due to low credit scores.
Smart Tips to Improve Your Credit Score
It is possible to improve your credit score by employing the right strategies. You must reduce your outstanding debt, pay bills on time, and dispute any errors on your credit report immediately. We present some key strategies for improving your credit scores:
- Reducing outstanding debt can have a significant positive impact.
- Timely payments are a cornerstone of good credit management.
- Regularly review your credit report for errors and discrepancies
Conclusion
It is essential for anyone navigating the financial landscape to understand the importance of having average credit scores to access loans. Your credit score plays a pivotal role in getting lower interest rates on your loans, besides approval for credit cards.
Shriram Finance recognises the significance of a good credit score and offers personal loans tailored to your needs. You can improve your average credit scores received from various credit bureaus by responsibly managing various loans from Shriram Finance. If you need a business loan, check the details and apply here.
Key Highlights
- Your credit score is a crucial factor in obtaining loans and favourable interest rates.
- Outstanding debt and payment history significantly impact your credit score.
- Different types of loans may require different credit scores.
- You can Improve your credit score through responsible financial practices.
