According to a report, only one borrower out of three is aware of the credit score. The same report revealed that almost 68% of the respondents did not know their credit score. The percentage is meagre, considering almost 200 million individuals are credit-active in the retail credit market.
In India, the major credit rating agencies are TransUnion CIBIL, Experian, Highmark, Equifax, etc. However, among them, TransUnion CIBIL is relatively the most popular. Besides knowing how to check CIBIL scores online, individuals should know all about this score.
Understanding the credit score
A credit score, often referred to as CIBIL score, is a three-digit numeric representation of an individual’s creditworthiness. The number ranges from 300 to 900 – the higher the score, the better the credit profile.
Ideally, a score of 750 and above is considered sufficient to qualify for most financial services and products. Financial institutions always check the credit score before advancing any credit facility to individuals.
By referring to this score, they can conduct a risk assessment of individuals with credit history. However, you need to know that this score is not constant and keeps changing depending on a few factors.
Therefore, you should also know these factors well so that you can understand any sudden dip in the score or any revision in that matter.
How to calculate a credit score?
Credit agencies collect the credit information from member financial institutions and, based on that, prepare a report. It also helps them assign a score that summarises one’s credit profile.
While at it, they consider a few factors, as mentioned below:
- Repayment history
The repayment history is a critical factor that determines the credit score of an individual. For instance, individuals sitting on existing debt piles, delaying payment of EMI or credit card dues, etc., are likely to experience a drastic drop in their scores.
- Credit utilisation ratio
The credit utilisation ratio or CUR is another aspect that influences the credit score to a great extent. Usually, financial experts suggest maintaining a CUR of 30% and below to maintain the credit score. A higher percentage than this presents one as credit hungry and also affects the score, accordingly.
- Credit types
The ratio of credit types that are secured and unsecured also decides the credit score. Usually, a healthy mix of both types of credit ensures a better credit score and vice-versa. It also denotes that an individual has experience in managing different financial products.
- Number of enquiries
Whenever a financial institution asks for your credit score from any credit bureau, they impose a hard enquiry. Resultantly, it affects the credit score. However, checking your credit score is considered a soft enquiry and does not affect this score.
Besides, the age of credit history also impacts this score. For instance, if you have years of credit history, the credit agency will assign a higher score.
Now that you know the factors that influence your credit score, you should know how to check the CIBIL score online to simplify the process.
How to check credit score for free?
Individuals can check their credit score in India from any of the credit agencies mentioned before. However, most individuals refer to TransUnion CIBIL for assessment. Therefore, individuals should know how to check CIBIL score online:
Step 1: Visit the official website of TransUnion CIBIL.
Step 2: Open an account with information such as name, email address, mobile number, and such.
Step 3: Once the username and password are created, you must fill up an online form.
Step 4: Enter details such as date of birth, PAN, mobile number, email address, and submit the form.
Step 5: Authenticate yourself with an OTP sent to your registered mobile number.
Step 6: Now, you can check your CIBIL score on the following page.
Note that you also need to provide your loan and credit card details to get the score during authentication.
As per RBI guidelines, all credit bureaus of India are liable to allow individuals to check their credit scores for free once a year. Additionally, the online CIBIL score check by PAN number is also free once a year. After that, individuals need to pay certain charges to access their CIBIL score and report.
However, individuals can check CIBIL scores for free by visiting reputed financial institutions like Bajaj Finserv. They allow individuals to check free CIBIL scores around the year.
Checking the credit score in a regular interval is necessary to detect any discrepancies in the report. Even a minor error in the credit history or report can pull down the score to a great extent.
Hence, once you know how to check the CIBIL score online for free and all the details and importance, you can work towards improving this score and secure great deals on most financial products.
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29 Replies to “How to understand and check your credit score for free?”
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