CREDIT SCORE RANGE: MEANING AND IMPA CT

Credit score is one of the first terms that people get acquainted with when they start learning the
basics of personal financing. It is an important term that everyone should know about as this 3-digit
score holds the power to influence lenders in your favour when you apply for a loan.

Though having a fair understanding of credit score is important, one must know about the various
implications and definitions that we come across while looking for a credit score. Through this article
we have tried to put forth some learning about the credit score and as we go further we will discuss
different credit score ranges, their meaning and impact on our financial options.

If you’re struggling to improve your credit score or to maintain it, we’re here to help. In this post we
have compiled a few common habits that you’ll find in people with a good credit score.

CREDIT SCORE BASICS

Credit score is a three-digit number that is given to every individual whose credit information is with
credit bureaus, also known as credit information companies (CIC), such as Experian and CIBIL. The
credit bureaus calculate credit score on the basis of an individual’s credit information, which is
submitted periodically by banks, credit card companies and other money-lending institutions.

Your credit score is not just a reflection of your financial wellbeing. It is also a key to get a loan
application approved quickly. If a lender is impressed by your credit score, then they may even
consider offering you a home loan, personal loan or any other loan at favourable interest rates.
Therefore, everyone must build and maintain a good score. And to do so, understanding the credit
score range is important.

Each credit bureau has different credit score range. For instance, CIBIL score ranges from 300 to 900
and Experian credit score ranges from 330 to 830. Your credit score can fall anywhere from 300 to
900 of range, with 300 being the lowest and 900 being the highest credit score. Higher the score
lower the risk of getting loan application rejected by lenders. In addition, each credit bureau uses
different credit scoring model to generate your risk profile as a loan borrower. Therefore, your credit
score from two different credit bureaus may not match.

Credit Score Range, Rating and Impact

Credit score is usually categorised as follows:

800 AND ABOVE

Grade: Excellent

Impact: An excellent credit score reflects that the borrower had consistently paid his/her loan
instalments and credit card bills on time and had no negative mark on their credit report. Lenders
find hard to say no to borrowers with excellent credit scores. This kind of credit score implies that
you’ll get various loan benefits such as quick loan approval, low interest rate and favourable deals on
all kinds of loans.

Key Tip: It takes a lot of work to reach the excellent credit score range and higher efforts to
maintain it. To enjoy the benefits of having an excellent credit score range, keep paying your
loan instalments and credit card bills on time.

720 – 799

Grade: Good

Impact: Credit score of most people fall in ‘Good’ category. People with credit scores in this
range has good chances of getting approval on loan application as it indicates the borrower
is dependable and can be given loan but the risk is still there. Therefore, depending on
lender, you may or may not get as many loan benefits as you might have expected.

Key Tip: To cement your chances of getting loan approval and loan benefits, borrowers must
constantly work towards improving their credit score. Be careful when handling debts as a single
mistake can slip can take you down.

500 – 699

Grade: Fair

Impact: Fair credit score indicates that borrowers have performed neither too good nor bad when
it comes to handling their loan payments and credit card bills. They are more at a risk of getting their
loan application rejected. Even if lenders grant them loan, they will not get it at favourable terms
and conditions. The loan will most likely be given at a high rate of interest, high down payment and
fewer or no benefits.
Key Tip: From this point, you’re either moving up or down the credit score meter. Therefore, it is
important to tread carefully when treating your debts. To move your credit score up, decrease the
debt amount, pay your bills on time and pay your loan instalments.

LESS THAN 500

Grade: Poor/Bad

Impact: There is no chance for people with poor credit score to get approval on their loan
application. It is a high risk category for lenders. Banks and other financial institutions are always
wary of people with poor credit score as they do not trust them to pay the loan amount on time. It
shows that the borrower is financially unstable, has excessive debt or has missed repayments in the
past. Even if a lender agrees to give you loan, they will ask for a guarantor to reduce the risk. This is
because, if under any circumstance you’re unable to repay loan to the lender, the guarantor will
cover the cost of your loan amount.

Key Tip: For people with bad credit score, there is only way to go and that is ‘UP’. To go ‘UP’ on the
credit score meter, borrowers must rebuild their credit score by making timely payments, decreasing
debt amount, stop applying for loans and avoid using credit cards till the previous loan amount
clears. Do this consistently and with time, your credit score will go up.

QUICK WAYS TO IMPROVE YOUR CREDIT SCORE

If your credit score lies anywhere below the excellent credit range then remember that you always
can improve it. It may take some time but by making a few changes in your credit handling ways, you
can reach the excellent credit score range in no time. However, you will have to be consistent in
your efforts so that you can once again gain the trust of lenders. To improve your credit score, the
following are a few quick tips:

 Always pay your credit card bills and loan instalments on time.
 Avoid frequent use of credit card
 Refrain from using more than 30 to 40 percent of your credit limit.
 Don’t apply for too many credit cards.
 Don’t apply for loans frequently.
 Check your credit report periodically to track your credit performance and check for
mistakes if any.