In India there are 4 credit information bureaus licensed by Reserve Bank of India: CIBIL, Experian, Equifax and Highmark. The credit bureau, which maintains credit information of individuals sourced from banks and other financial institutions, generates a credit bureau score and a credit report. The credit bureau score is a reflection of your monthly loan EMI and credit card bill payments. The score also reflects the number of times a hard enquiry (your credit report requests to the bureau) was done. The credit bureau report contains your personal information such as your name, date of birth, residential address, PAN, voter ID number, contact number, types of credit availed, size of loan or credit limit spend, outstanding current balance and your credit score.
The credit bureau score has a minimum value of 300 and a maximum value of 900. The higher your credit bureau score, the better are your chances of getting credit from financial institutions like banks and digital lending platforms. A good credit bureau score indicates your prompt responsibility towards EMI payments, credit card spending and maintaining a good balance of different types of loans. Banks, credit card companies and digital lending platforms look at your credit bureau scores to evaluate the potential risk posed while lending credit to you. The credit score tells banks if you can qualify for the loan or not. The credit scoring system is considered a trusted system by banks for credit evaluation of borrowers.
Credit Score Range
Score less than 0 – A credit score of 0 or less means that you have no credit history. It is wise then to apply for a personal loan preferably from a digital lending platform because banks are likely to reject your loan application if you do not have a credit history.
Score between 350-500 – A score between 350 and 500 is poor, indicating either a default in past EMI payments or excess credit utilization on credit cards.
Score between 550 -650 – A score at this range is acceptable as it indicates that you have been regular with your payments and can be trusted for fresh credit. The chances of getting a loan approved are good.
Score between 650-750 – This range indicates that you are doing well with your finances. You should stick to your financial habits to maintain or improve your score. The chances of getting a loan approved are great.
Score between 750-900 – This is considered the best range for a borrower. This clearly indicates that you have ben regular with your EMI or credit card bill payments. You can avail a loan with ease.
How to boost your Credit Bureau Score?
A good credit bureau score can get you a personal loan easily because the lender can look at your repayment history and gauge your prospective repayment behavior for the loan they are going to approve. There are ways by which you can ensure a positive credit bureau score.
- Timely payments
Ensure that all your loan repayments happen on time each month. Try to keep some extra cash handy so that you are not short while paying EMIs regularly each month. You can set up standing instructions in banks or use auto debit for digital lending platforms so that the amount is directly debited from your account towards EMI.
- Credit card limit
Keep credit card spending at a minimum. Make sure you pay your card balance in full each month. Too much spending above the credit limit could increase your credit utilization and pile up into credit card debt.
- Closing of multiple credit cards
In case you are operating more than one credit card and feel the need to close all of them, then make sure you don’t close all the cards at once. The sudden closure of credit cards will lead to an absence of credit history which is the main criteria that lenders look at while evaluating your credit worthiness.
- Multiple enquiries
A hard enquiry is made by the lender to the credit bureau when you apply for a new loan or a new credit card. Too many enquiries in a short span of time would indicate desperation for credit and hence affect your credit bureau score.
- Check for errors
Apply for a credit bureau report just before you want to apply for a loan. This aids in checking for any errors that appear on the report either from the lenders or the bureau. If you do not dispute an error in the report, lenders could be looking at incorrect information while evaluating your credit worthiness.
Take these measures to ensure a good credit score and you will improve your chances of getting your loan approved.