YOUR FINANCE ED.

MAKE FINANCIAL LITERACY YOUR PRIORITY.

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Know your Credit Score.

A Good Score helps you Save Some Cash.

So, it matters.

Your credit score – a simple number that can make a big difference in your financial life. How? Let’s break it down. Your credit score reflects your creditworthiness. It’s the number that tells potential lenders how trustworthy you are as a borrower. Why should you care? Well, it can save you a lot of money when you need to borrow funds for personal or private purposes. Here’s the deal: Your credit score helps bankers and creditors determine the interest rate and the amount of loan they’ll offer you. A good credit score can open doors to higher loan amounts with lower interest rates, which means you pay less in the long run.
But what’s considered a good credit score? In India, the term “Credit Score” is often used interchangeably with “CIBIL Score.” CIBIL, or Credit Information Bureau India Limited, provides credit scores that range from 300 to 900. Here’s the golden rule: If your CIBIL Score is above 750, you’re in excellent standing. That means you’re more likely to qualify for loans and secure better interest rates.

Now, let’s dive into what factors contribute to a good credit score, particularly using the CIBIL Score as a reference:

  1. Repayment History:
    Timely debt payment is a surefire way to boost your credit score. Your repayment history demonstrates how well you’ve managed your credit obligations.
  2. Credit Utilization:
    Each person is eligible for a certain amount of credit based on their financial profile. Credit utilization assesses how much of this available credit you’ve used. A good rule of thumb is to use only around 30% of your available credit.
  3. Credit Duration:
    Having a long-term loan commitment and successfully repaying it over time can significantly boost your credit score.
  4. New Credit:
    Here’s the catch – being overly eager to take on new debt can negatively affect your score. Each time you inquire about anew loan, it can have a not-so-great impact on your credit score.
  5. Credit Mix: To maintain a healthy credit score, it’s essential to have a diverse mix of loans. If all your loans are credit cards, it won’t do your score any favors. But if your loans include a mix of credit cards, home loans, and personal loans, you’re on the right track.

So, what’s revealed in your CIBIL Score? It’s a reflection of your financial history, from your repayment track record to your credit utilization and more. Understanding these components can help you take control of your financial future and secure better loan terms. Your credit score isn’t just a number; it’s your key to saving money and unlocking financial opportunities.

-by Jayapratha Kannan.

 

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