What are Good and Bad Credit Scores?

Loans have been regarded as a financial burden; consequently, it is often suggested that you must utilise credit only as a last resort. However, sometimes securing loans can become the need of the hour. Even if you have a sizeable savings fund and a well-paying paycheque, you still have to secure loans for the essential and sizeable expenses of life – be it to purchase a home or fund your child’s foreign education.

This is where a credit score becomes crucial. A credit score is a metric that judges the credit behaviour of an individual. The credit behaviour reflects your credit repayment and utilisation pattern. It involves how frequently you have availed credit, how much of it you have utilised, and if you have paid your bills on time.

Based on these patterns, a credit report is prepared, and you are assigned a credit score.

A good credit score shows that you have been on your best credit behaviour. A bad credit score, on the other hand, indicates your irresponsible handling of the credit.

Now you might wonder what are good and bad credit scores after all. What score is good, and what score is bad?

Stay tuned and read along to find out.

Before that, you must note that a credit score is computed by CIBIL and lies between 300 to 900.

What is Regarded as a Good Credit Score?

A credit score above 750 is regarded as a good credit score. It means that you have been a financially responsible person when it comes to handling credit. It indicates that you have managed to pay your bills on time and utilised your credit efficiently and responsibly.

What is Regarded as a Bad Credit Score?

A credit score below 600 is regarded as a poor credit score. It means you have been irresponsible with credit. A bad credit score can be a consequence of untimely payments and over-utilisation of credit. However, some errors or discrepancies are also common that can make your credit score look bad.

What Does Your Credit Score Say to the Lender?

As mentioned before, a credit score is a reflection of your credit behaviour. It shows how you have handled your credit in the past. The pattern helps lenders speculate how you will handle the credit if they issue it to you.

It’s a given that a bank or lending agency would only offer you credit and approve your loans if they think you will pay them back in time. Consequently, a high credit score would deem you worthy of the credit as you would most likely pay it on the basis of your previous pattern.

In a nutshell, a good credit score increases the possibility of loan approvals. If you depend on credit to make essential lifetime purchases, it is highly suggested that you take a look at your credit score to avoid any last-minute surprises that can affect your financial and investment plans (You can use a financial calculator to simplify investment decisions.)  

Other Perks of Having a Good Credit Score?

Faster loan approvals are not the only advantage of having a good credit score. There are other advantages that can benefit you in the long run. For starters, you can get lower interest rates and a wider choice when it comes to credit.

How Can you Improve your Credit Score?

Did your credit score check already? If the result is disappointing, you do not have to worry. As they say, there’s always room for improvement. It is possible to improve your credit score. Here are some tips that can help.

• Get a grip on bill payments.
• Consume 30% or less of your available credit.
• Limit applying for filing multiple loans at a short interval.
• Consider consolidating your debt.
• Track your credit score.
• Consider using a debit card instead of a credit card for a non-essential shopping spree.

The Bottom Line:
So, now that you know what a bad credit score and a good credit score are, you can do the needful to ensure you have a high credit score. Remember, a credit score is crucial for securing loans. If you want to make the process possible and faster, a good credit score is essential.