The categorisation of credit score ranges and credit score may differ for each Credit Bureau or Credit Information Company (CIC). The credit score range indicates the credit risk that borrowers pose to the lenders (Banks/NBFCs).
The credit score depicts your creditworthiness based on your past credit behaviour. Any credit score close to 900 improves the chances of loans and credit card approval.
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Credit Score Ranges
Credit score typically ranges between 300 to 900 and is further categorized into various sections, such as no score, low, fair, good and excellent.
Let us have a look at an indicative credit score range that Credit Information Companies or credit bureaus consider while evaluating your new credit applications for loans and credit cards:
| Credit Score | Status | What does it mean |
| 800 and above | Excellent | Low-risk borrowers, easier to secure a loan at preferential terms |
| 750 to 799 | Very Good | Good credit history, easy to get the credit application approved |
| 701 to 749 | Good | Can get loans and credit cards, good scope for improvement |
| 651 to 700 | Fair | ‘Subprime’ borrowers, difficult to qualify for new credit because of the high risk of default |
| 300 to 650 | Low | High chances of credit rejection if applying at this score, focus on rebuilding the credit score |
Note: The credit score range mentioned above is only indicative and may vary from lender to lender and bureau to bureau.
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Importance of Maintaining a Good Credit Score
Good or high credit score depicts the consumer’s creditworthiness and past credit behavior and marks the borrower at low risk for lenders.
It helps the consumer in availing loans with ease, along with instant credit card approvals.
High credit score increases the negotiating options for the borrower and enhances the chances of qualifying for the best loan offers.
It is suggested that you try to improve your credit score to further avail credit at low interest rates with additional benefits.
Credit Report Companies in India
In India, there are a total of four CICs or credit bureaus licensed and authorized by the RBI to calculate and generate credit scores for consumers across the nation. These credit bureaus generate credit scores for individuals and credit ranks for businesses, companies, enterprises, and organizations based on the credit information provided by the banks /NBFCs, and other financial institutions every month.
Below stated are the four leading credit bureaus operating in India:
| TransUnion CIBIL | Equifax |
| Experian | CRIF Highmark |
It is worth mentioning that each credit bureau in India uses a different algorithm to calculate and generate credit scores and credit ranks. As per credit bureaus, the higher the credit score, the lower the risk of getting loan applications rejected by lenders.
How will your Credit Score Impact your Borrowing Process
While applying for credit, your credit score plays the most vital role. While analysing your credit application, lenders review your credit score and may approve or reject your application.
CIBIL score helps lenders understand your credit history and the risk involved if they decide to extend a line of credit. Let us understand how credit score affects your borrowing process.
Excellent Credit Score
An ‘Excellent’ credit score reflects that the borrower has consistently paid his/her loan installments and credit card bills on time and has no negative mark on the credit report.
Lenders consider giving loans and cards to such borrowers as less risky. This kind of credit score implies that you will get various loan benefits such as quick loan approval, relatively lower interest rates, and favourable deals on all kinds of credit.
Good Credit Score
Credit score of most people fall in the ‘Good’ category. People with credit scores in this range have good chances of getting approval on loan applications, as it indicates the borrower is dependable and can be given a loan but the risk is still there.
Therefore, depending on the lender, you may or may not get as many credit benefits as you might have expected. You can take steps to enhance your credit score and apply for credit only when required.
Fair Credit Score
It indicates that borrowers have performed neither too well nor too badly when it comes to handling their loan payments and credit card bills.
They are more at risk of getting their loan application rejected. Even if lenders grant them a loan, borrowers might not get it at favourable terms and conditions. The loan will most likely be given at a higher rate of interest, high down payment, and fewer or no benefits.
It is recommended to rebuild credit score, reduce over-dependence on existing credit, and not apply for credit if not required immediately.
Poor Credit Score
People having poor credit scores are considered a high-risk category for lenders. Chances for approval of credit for such people might be bleak.
Banks and other financial institutions are always wary of people with poor credit scores as they do not trust them to repay the loan amount on time. It shows that the borrower is financially unstable, has excessive debt, or has missed payments in the past.
Even if the lender agrees to give you a loan, they may ask for a guarantor to reduce the risk.
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How to Improve Your Credit Score Gradually
Your credit score is an imperative measure to analyse your financial health. It tells lenders how responsible you are in terms of using your credit. The better the score, the better the chances of getting your credit approved.
A higher credit score opens the door for you to negotiate with the lender. There are ways to improve your credit score. Follow the below-mentioned simple and quick ways to make your credit score better:
Pay Dues on Time
Paying your credit card dues and loan EMIs on time is foremost. To maintain a healthy credit score, you must pay off your EMIs on or before the due date.
Set monthly reminders to pay your dues/bills on time. You can also set an autopay option or provide standing instructions for those bills/dues from your account.
Do Not Close Old Accounts
Your credit score also depends on the length of your credit history. Hence, it is advisable to not close your oldest active account. This will help you build a solid and lengthy credit history.
Apply for New Credit only when Required
Too many hard inquiries in a short period may negatively impact your credit score.
You should not apply for credit cards and loans unless you need them immediately. If you need credit, do proper research and apply for the loan only when you are certain that your loan application will be approved.
Keep a Check on your CIBIL Report
Keeping a check on your CIBIL report regularly is a healthy practice. You will be able to assess errors in your report, if any, upon checking your report regularly.
If there are any errors, you can raise a dispute for the same which may help you improve your credit score.
Create a Credit History
If you do not have any credit history, lenders won’t be able to analyse the risk of lending money to you. It may make it difficult for you to get pre-approved loans or specific credit cards when required.
Hence, you should opt for a short-term personal loan or a secured/entry-level credit card and build your credit score to become eligible for various loans and credit cards when required in the future.
Balance Credit Utilization Ratio
Another important factor that may affect your credit score is the credit utilization ratio. It is the ratio of the credit utilized by you to the overall available credit limit in your name. You can reduce over-dependence on credit and also get the credit limit enhanced, if possible.
However, if you have a high credit utilisation ratio and you make payments on time, no bureau will penalise you for it.
Following the disciplined credit behaviour will help you improve your credit score. It is essential to know that this will not improve your credit score immediately. However, regularly following these practices may significantly impact your credit score and help you improve it in the future.
3 Comments
Dear Sir,
I have Bajaj finance, pending loan since last two years,
Company is asking me to pay Rs 7500 of pending instalment, but total outstanding is Rs 85000, as interest and late charges, even in cibil report outstanding showing Rs 7500,
Please guide me as to completely clear the cibil report and get creditworthy, how much should I pay of these two amounts?
Thanks for your help
It is suggested to clarify the actual remaining amount from the lender and repay the pending dues. You should go for making the complete payment and closing the account instead of settling it. Settling the loan account can have a severe impact on your credit score.
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