A credit score represents an individual’s creditworthiness based on their credit history. Financial institutions use credit scores to determine a person’s eligibility for loans, credit cards, and other financial products. The higher the credit score, the better your chances of getting your loan approved with favourable terms and conditions.
In India, credit scores are often referred to as CIBIL scores, as most lenders rely on scores generated using CIBIL’s database and algorithm. So, what is a good credit score range in India? What is a good CIBIL score range? The blog has answers to all these questions.
Basics of credit score
A credit score is a three-digit number in the 300 to 850 range used to assess a person’s creditworthiness. Lenders use this score to determine the risk of extending a loan to an applicant. Lenders calculate credit scores using your credit history. Here are five factors, along with the percentage of the score they make up for:
- Payment history (35%) shows you have paid your bills on time.
- Accounts owed (30%) are the credit and loans you are availing.
- Credit history’s length (15%) shows how long you have been using credit.
- Credit mix (10%) is the types of credit (home loan, vehicle loan, credit cards) you have availed.
- New credit inquiries (10%) show the frequency of your credit inquiries.
Credit score ranges
Between 300 to 850, let us see what a decent credit score range in India is:
- Exceptional credit score range (800 to 850)
The maximum credit score limit is 850, but you do not need to score a perfect 850 to access credit. Any credit score between 800 to 850 is considered not a decent but an exceptional score. Individuals that have such a high credit score have no late payments and little to no credit card balances.
Having a credit score in this range ensures that the borrower is a responsible credit user. As a result, lenders easily extend loans as the borrower is a low-risk candidate and more than likely to repay the loan on time and in full.
A credit score range of 800 to 850 gets you easier loans and better terms. In addition, if you have an exceptional credit score, lenders are more likely to offer you better interest rates and repayment tenures than the average borrower.
2. Very good credit score range (740 to 799)
Borrowers with a very good CIBIL score in the range of 740 to 799 are very responsible regarding their finances, especially in managing their debt. The score signifies that you have settled your financial obligations like loans, utility bills, rent, etc. and carry minimal balances on your credit cards.
The very good credit score range of 740 to 799 reflects that an individual is a low-risk borrower. If that is your score, most lenders will easily approve your loans and depending on the lender, you may also get some favourable terms.
3. Good credit score range (670 to 739)
The middle range of 670 to 739 is considered a good credit score range. You must have a decent credit history to have a credit score in this range. Although the range may not get you attractive terms like low-interest rates, exceptional or very good credit range and flexible tenures, they are not as bad as in score ranges that follow.
With a good CIBIL score range, lenders will approve your application for almost all types of loans at the usual market terms. Also, if you have a score of 670 to 739, you can still find great loan offer with a bit of research, comparing the interest and tenure of different lenders, and reading the fine print.
Since you are not too far from the very good credit score range, consider improving your credit report before taking new loans. Make timely payments, automate bills with e-mandates, and repay outstanding loans.
4. Fair credit score range (580 to 669)
Credit scores ranging from 580 to 669 come under the fair category, and lenders are likely to extend loans but not at desirable terms. Borrowers with few missed payments in their credit history but no serious defaults are likely to fall in the fair category. Apart from paying high-interest rates for approved loans, you may have difficulty getting some specific loan types approved depending on the lender.
5. Poor credit score range (Under 580)
300 is the lowest credit score limit an individual can have, and any score between 300 to 580 is considered a poor credit score. Candidates with many missed payments and defaulted loans tend to have poor credit scores. Borrowers in this range have little to no chance of getting new loans. In rare cases, even if a lender approves a loan, the borrower will have to bear the burden of very high interest and tight repayment tenures.
6. No credit
It is possible for an individual to have no credit score as well. People with no credit card or who have not taken a loan will have no credit score. So, can people with no credit avail of loans? Yes, people with no credit can still apply for loans. But you will have to be financially responsible as once you take a loan, you will start creating your credit history.
If you have a regular income, you can start by availing short-term personal loans for your lightweight expenses. First, make sure to pay your monthly instalments on time. Then, you can apply for a credit card, pay your bills with it and keep settling your balance every month. Slowly, you will have built a good credit score, and you can apply for long-term secured and unsecured loans as per your need.
A credit score is an essential element in the financial aspects of your life, as those three digits affect your ability to obtain credit at appropriate terms. And whether your credit score is closer to 300 or 850 depends on how you handle your finances. However, as long as you keep paying your bills and settling your debts, you should have no issue getting loans.