Your credit score determines your ability to get loan, credit card…
Credit score and credit information report (CIR) indicate your credit-worthiness. Based on your repayment history, credit bureaus like Cibil, Experian and Equifax assign a credit score which is a numeric summary of your credit history. You can access your credit score by filling-up a form on the credit bureau's website and authenticating your identity. Range of credit scores is 300 to 900 for Cibil, 280 to 850 for Equifax and 330 to 830 for Experian.
All banks and financial institutions have instant access to individuals’ credit scores and credit reports and the same are checked when an application is made for a loan or for issue of a credit card. Approval of loan (and terms thereof) or issuance of credit card is on the basis of the applicant having a satisfactory credit score. In fact, higher the score better are the chances of approval.
How can you improve your credit score?
First of all, you need to build a credit history by applying for a credit card, if you do not have one. Use the credit card smartly to get a good credit score. When needed, you can ask for your credit report from Cibil or others. If your credit score is above 700-750, there is no need to worry because banks will consider your credit management to be good. Some non-banking financial companies (NBFCs) may lend to persons with score above 650.
All others who credit score is lower than above numbers, have to figure out from the credit reports whether there are any inaccuracies therein such as late payments. Such errors need to be resolved with the credit bureaus and banks so that correct picture is reflected in the report. There have been many instances of loans being denied based on wrong rating by Cibil which in turn was a result of wrong reporting by bank to Cibil.
Some of the tips to improve credit scores are: (a) Pay utility bills (electricity, water, phone, mobile, gas etc) on or prior to the due date. (b) Pay credit cards bills on time. Pay the full amount and do not pay minimum amount to carry-forward the rest. (c) Have just one or at the most 2 credit cards. Close all unused credit cards (d) Use credit card sparingly and do not use up full credit limit to make large purchases (e) Pay loan EMIs on time and settle older loans (d) Avoid unsecured loans like personal loans. (f) Avoid multiple loan applications (g) Never allow bouncing of a cheque issued by you