Based on your loan history (of all kinds), a credit score is a number that measures and rates your financial health. To decide whether to accept someone for a loan or credit card and to determine what interest rate to charge, lenders use credit scores.
In order to decide whether to rent your house, give you a job, or how much to charge you for car insurance, other businesses may also use your credit score.
Let us understand what credit scores really are
The credit score ranges between approximately 300 and 850. “Good” scores are considered in the range of 600. When you have a higher score, you have a greater chance of being accepted for loans in more favorable conditions. You can visit the EarlySalary Free Credit Score check to get an idea of your credit scores. The free credit score facility is also part of the EarlySalary Credit Suite – a complete offering for aspiring Indian professionals, featuring Instant loans, a Salary Card, and much more!
There are two types of credit scores – generic & custom scores:
- To assess general credit risk, credit scores are utilized by several forms of businesses and lenders. Using the same formula for all three credit reporting agencies, you can access the generic score as one score.
- Custom scores are for individual lenders. It relies upon credit score reports and other data from the lender’s own portfolio, such as account history. These are unique to a single organization or may be used by specific forms of lenders. For specific types of lending, for example, mortgage or auto loans, custom credit scores can apply.
What Kind of Borrower are you: What a Credit Score Reveals
- History of Payments
When they give somebody money, there is one main question that lenders have in their minds: “Will I get it back?”
The following factors are taken into account in this portion of your score:
For each account on your credit report, have you paid your bills on time? Paying late has a detrimental impact on your ranking.
How late were you—30 days, 60 days, or 90 + days if you paid late? The later you are, the worse your score is.
Have some of your collection accounts been sent to you? To potential lenders, this is a red flag that you could not pay them back.
- Owed amounts
This second-most critical portion discusses the following considerations:
How much would you intend to give on those forms of accounts, such as mortgages, car loans, credit cards, and payment accounts?
How much do you owe in total and how much do you owe in installment accounts as opposed to the original amount?
How much did you use your total usable credit? Nothing is better, but owing a little can be better than owning none at all. That way, lenders get to see that you are accountable and financially secure enough to pay it back if you borrow money.
- Credit History duration
How long you’ve been using credit also takes into account your credit score. You’ve had commitments for how many years? What is the average age of all your accounts and how old is your oldest account?
- New credit
The credit score takes into account how many new accounts you’ve got. It looks at how many new accounts you have recently applied for and when you opened a new account for the last time.
- Credit forms in use
If you have a combination of various forms of credit, such as credit cards, store accounts, revolving loans, and mortgages, is the final thing you consider when deciding your credit score. It also looks at how many accounts you have in total. As this is a small component of your ranking, don’t worry if you don’t have accounts in any of these categories, and just increase your mix of credit types by not opening new accounts.
Small tips to keep in mind while you apply for a loan
- Pay the bills on time, and don’t be more than 30 days late if you need to be late.
- Don’t open lots of new accounts all at once or even over a span of 12 months.
- If you plan to make a big purchase, such as purchasing a house or a car, which would require you to take out a loan, check your credit score about six months in advance.
- Keep the balance of credit cards below 15-25 percent of your total credit available.
Do you always need a credit score?
Although your credit score is important for getting accepted for loans and getting the best rate of interest, to get the kind of score that lenders want to see, you don’t need to stress about the scoring criteria. With credit solutions like EarlySalary that offer more than just instant loans, there may not be any reason for you to consider a traditional lender. EarlySalary’s Credit Suite is a revolutionary new all-in-one package for aspirational Indians of this next decade. With a free credit score facility available instantly, there’s also:
- Short term, Instant loans with ₹8000 to ₹5 lakhs limit
- Long Term Personal Loans with the 12-months to 36-months EMI options
- Free credit score facility for a detailed snapshot of your credit financial position
- All-new digital EarlySalary Card with customized credit solutions customized features
- Buy on EMI functionality so you can ‘Pay Later’ during checkouts.
Sure, your score will shine if you handle your credit wisely. But your finances can shine without a credit score too!
Feel free to get in touch with us for any questions on credit, loans, and your instant cash needs! We’re listening all day on: