Importance of Credit Score
by Finway FSC Empowering People FinanciallyCreditworthiness of an individual is determined by his or
her credit score. A person’s credit file is scrutinised and is judged on the
basis of his credit report. These data are gathered from the government
registered credit bureaus. In India, at present there are four credit
information companies which are licensed companies of the Reserve Bank of India
(RBI). These are Credit Information Bureau (India) Limited (CIBIL), Experian,
CRIF High Mark and Equifax.
Credit score may vary between agencies. CIBIL credit score
is considered to be the most popular one. It ranges from 300 to 900. The best
score is 900. Person with no credit history have score of – 1. It takes time to
gain a satisfactory credit score. A time
period of at least 18–36 months is required.
Scheduled banks and other financial companies analyse the
credit score of an individual before approving any loan to an individual. Credit
card companies also keep of the track of a person’s credit score before
offering him or her credit card. The lending companies always tally a person’s
credit score with information in his or her credit report in order to calculate
the risk of lending money to a borrower. There is always low risk of loan application
getting rejected if the credit score is high. Most of the time companies do not
take chance with individuals with low credit score.
One can borrow
money for various purposes from the scheduled banks or other financial
companies with a good credit score. Availing home
loan in Delhi and other places in India are quite
common nowadays. Other retail loans like car loans and educational loans are
also provided by banks and other financial companies & institutions. Loan against property are
easily available for personal or business ventures with simple way of repayment
through easy instalments.
Approving of unsecured business loans mainly depend
upon of the credit score of the particular borrower. The loan is approved or
sanctioned by calculating his or her credit score and by analysing the credit
history and the cash flow. No property or assets are kept as collateral against
the loan being approved. The financial companies take a big risk in such cases
depending on the credit information of the particular borrower.
Having a good
credit score may lead to access to good financial and business prospects and
opportunities. It helps in the long run to manage the resources efficiently.
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Created on Aug 29th 2019 04:20. Viewed 135 times.