Credit is a term that has more than a single meaning in finance. However, most people take credit as an amount of money borrowed by a borrower from a lender and then paid back to the lender along with interest. Credit also defines a person or a business’s ability to repay debts or credit history. To improve credit score a borrower can use any cibil score app to keep a check on their credit score.
Credit cards are the most commonly used way of getting credit these days. Other than credit cards, you can also take a loan from banks to fulfill your needs or take an instant loan through an online portal. To take a loan or a credit, a person must maintain their credit score. It is a three-digit number, usually between 300-850, which is held to check a person’s credit risk. Money lending apps also provide users the feature to check free credit score before availing of a loan. It is typically a meter to range the likelihood of a person paying their bills on time. A credit score is based on the following ranges-
- 300-579- Poor
- 740-799-Very good
A higher score demonstrates a person’s responsible credit behavior in the past, which gives lenders and creditors more confidence when evaluating a new request for someone’s credit. An individual’s credit score can be calculated on any bill pay app according to the information included in their credit reports. Few credit scoring firms consider the following factors-
- Payment history-It is the most significant factor used while calculating someone’s credit score. A person’s payment history includes all the information on open credit accounts in their name. It also provides data on late payments, debt collection, bankruptcy filings, and the borrower’s timely bill payment.
- The types of credit- Some models also examine a person’s credit accounts. It is a good idea to check both revolving and installment accounts. It assists lenders and creditors in ensuring that you are comfortable managing different types of credit.
- Recent credit request- A person must pay all past liabilities before applying for a new credit. Late payment of past liabilities hurts a person’s credit score as it may suggest to the lenders that you are taking more loans than you can timely pay back. Hence one must only apply for new credit when one needs it.
Is it essential to maintain a higher credit score? The answer is yes. When you become a borrower with a higher credit score, you can receive more favorable credit terms, which can translate into less interest and loan payments over the time of the account. However, everyone’s financial situation is unique, but lenders also have criteria for granting credit, including detailed information about your income. You can even check your HDFC cibil score through a credit lending app.
The types of credit scores examined by creditors and lenders are based on their industry. Credit scores can also differ according to the scoring model used, and CRAs furnish the credit report. It’s because only some creditors report to all three CRAs nationwide. Some creditors may also write to only two or one of them. In addition to it, lenders can also use a composite credit score from all three nationwide CRAs.