The data on credit histories of individuals were not-so-important part of personal finance summary, until just a decade ago. But, with the inflow of western winds and emergence of popular loan culture in India, the role of credit scores and information is gaining more importance than ever before.
In India, Credit Information Bureau (India) Limited, or Cibil, is the credit bureau that gathers data on individual’s payment details, credit reports and scores; that forms an indicative base for determining the chances and probability of your loan application’s approval by a lender.
A good credit history can pep-up your chances for quick screening and convenient loan approval. On the other hand, a bad credit history will prompt lenders to categorize your application into ‘risky’ customer with an indication of higher probability of default based on past pattern of credit usage and loan repayment behavior.
Moreover, Cibil has now decided to make these credit scores – a three digit numeric summary of credit history for the last 3 years rated on a scale of 300 to 900 points – available to individuals for a fee of Rs. 450 per request.
In 2009, Cibil had made credit information reports public and available to individuals at a nominal cost; to provide them with the factual snapshot of an applicant’s credit history and payment records. So, looking at the good response then, Cibil has decided to repeat the good cause of spreading credit awareness amongst individuals.
The nearer your score is to 900 points; it gives banks a positive estimate of an individual’s ability to repay a loan. That’s not all. For individuals who have appropriately managed their credit obligations can also negotiate better terms with the bankers in securing a loan, based on their reputational collateral with the lenders.
On the flip side, you tend to lose out on the benefits of high credit scores if your score is at sub-par standards on credit rating system. You might have to pay high interest rates on your loans or even suffer loss of credibility while entering into an EMI contracts for small retail or automobile loans.
Tips For Building Good Credit Score?
- Clear all your outstanding bills.
- Make all sundry payments on time.
- Keep a tab on your credit report periodically.
- Pay loan EMIs on time.
- Use credit cards judiciously.
So, are you game for a good credit score?