A credit score is a number that helps lenders understand the risk of lending money to someone and whether they might not get paid back in full. It also gives consumers a clear picture of their credit health. Credit scores typically range from 300 to 850, with a higher score being better. A higher score shows that a person is less likely to miss payments. However, a credit score doesn’t always predict with certainty if someone will miss a payment. Instead, it ranks people from the least risky to the most risky when it comes to paying bills.

How Credit score works?

• Payment History:

Your payment history shows whether you’ve paid your credit accounts on time. It also includes any bankruptcies, collections, or missed payments. More payment issues result in a lower credit score.

• Amounts Owed:

The amount you owe on your credit accounts affects your score. If you constantly spend up to or beyond your credit limit, it signals a higher risk. Having many open accounts with large debts can lower your score.

• Length of Credit History:

A longer credit history can help improve your score. Scoring models look at the age of your oldest and newest accounts, along with the average age of all your accounts. Accounts in good standing can stay on your report for up to 10 years.

• New Credit:

Frequent credit applications may suggest financial stress, and each application can slightly lower your score. Before opening a new credit account, think carefully about whether it’s worth the temporary dip in your score.

Why Your Credit Score Matters & How to Check It?

A good credit score is crucial for securing loans and credit cards, as lenders use it to assess the risk of lending. A higher score signals lower risk, making it easier to obtain favorable loan terms and lower interest rates.

• Loan Eligibility:

A strong credit score improves your chances of getting approved for loans and credit cards, often leading to better terms.

• Interest Rates:

Those with higher credit scores typically qualify for lower interest rates, reducing the overall cost of borrowing with smaller monthly payments and less paid in interest over time.

• Insurance Premiums:

Credit scores can also impact insurance premiums, with higher scores potentially leading to better rates due to perceived lower risk.

• Employment Opportunities:

Some employers review credit scores for positions involving financial responsibilities, making a good score advantageous.

In India, managing your financial health includes regularly checking your credit score. Various platforms offer easy and often free access to your CIBIL score. Here are some trusted websites for checking your credit score:

1. CIBIL: cibil.com – Register and pay (~₹550) for a detailed report.
2. Poonawalla Fincorp: poonawallafincorp.com – Free CIBIL score check.
3. Paisabazaar: paisabazaar.com – Free CIBIL score with monthly updates.
4. Bajaj Finserv: bajajfinserv.in – Free CIBIL score check upon registration.
5. CRED: cred.club – Check your credit score via the app or website.

How to Improve Your Credit Score?

1. Pay On Time:
   • Ensure timely payments of all dues and automate payments to avoid missed due dates.
2. Monitor and Correct:
   • Regularly check your credit report for errors and dispute inaccuracies to prevent negative impacts.
3. Smart Credit Management:
   • Limit new credit applications, maintain a healthy loan mix, and keep your credit utilization below 30%.
4. Build and Maintain History:
   • Keep older accounts open, gradually build your credit with small loans, and be cautious with co-signed loans.

Conclusion:
A good credit score is vital for accessing favorable financial products, from loans to insurance premiums. Understanding how credit scores work, regularly checking your score, and applying practical tips to improve it can significantly enhance your financial health. By maintaining a credit score above 650, you increase your chances of securing better terms and rates. At Dhansafal, we value your financial well-being and aim to support your journey towards financial success. To be eligible for our loan products, ensure your CIBIL score is above 650, allowing us to offer you the best possible financial solutions.