If you are planning to buy a home, car or any other product, want loan to start a business or want to get a new credit card, you need to have a good Credit Score to avail quick loans. Having a high credit score and a good credit history can set you up for many perks and low-interest loans and offers in the future. A good credit score makes it relatively easy to avail loans and decides your credit worthiness.

A credit score, is a three-digit number that represents a summary of an individual’s credit health. There are few credit bureaus in India which means you may have more than one credit score. For the rest of this post we will focus only on CIBIL as the CIBIL Information Report (CIR) is most widely used by Banks and other financial institutions.

Usually credit score ranges from 300 to 900, with 900 being the best score. Higher your credit score, the higher are your chances to get your loan approved. So it’s always advisable to check your credit score before you apply for a loan. Individuals with no credit history will have a score of -1. If the credit history is less than six months, the score will be 0. The score is a picture of you as a credit risk to the lender at the time of your application. 

But what is a good enough score?

A score above 750 usually suggests good credit management. A person's credit history, in fact, is a record of how he/she has used and managed credit in the past. Every financial transaction in your life involving credit is recorded in your credit history - from your payment history on your credit card, to your history on paying off your car loan, to any suits that may have been filed on you. Below are some basic simple guidelines for your understanding:

760 – 900: Excellent
720 – 760: Very good
680 – 720: Average – very good
620 – 680: Fair – poor
Below 620: Poor

If you have a score of 750 and above, banks, NBFCs and other financial institutions are comfortable with approving loans to you. But if you have a score less than 750, banks feel it is as a risk to provide you a loan or a credit card.

Good credit management leads to higher credit scores, which in turn lowers your cost to borrow. The next article will explain how you can improve your credit score.