Different Credit Score Ranges and What They Mean

A credit score is often seen as the most crucial component of an individual’s financial condition. From loan approvals to interest rates, and borrowing terms to credit card eligibility, it influences everything. This is one of those important factors that help determine an individual’s creditworthiness.

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Different Credit Score Ranges and Their Meaning
Conclusion

In simple words, a credit score can be defined as the numerical representation of your creditworthiness. This is a three-digit value that is calculated on the basis of your credit history. Usually, your credit report is generated using details about things like your borrowing and repayment history, ongoing loans, active credit cards, etc.

One of the most important uses of credit scores is determining your eligibility for any kind of credit, such as cards, loans, etc. Lending institutions always check an applicant’s credit score before sanctioning a loan as it helps them assess the risk of lending money to that individual. Every lender has a minimum credit score requirement for different types of loans.

Apart from this, your credit score can also have a significant impact on your loan interest rates. The higher your credit score is, the better your rate of interest will be.

Different Credit Score Ranges and Their Meaning

In India, credit score is calculated by four different credit bureaus: Equifax, CRIF Highmark, CIBIL, and Experian. All these credit bureaus are licensed by the Reserve Bank of India (RBI) and calculate the score on the basis of information provided by multiple banks and financial institutions. Usually, the credit score issued by CIBIL is known as CIBIL score and credit score is a generic term used for the score generated by the other three bureaus. The CIBIL score range is from 300 to 900, whereas the generic score range is between 300 and 850.

If you also have been wondering what is a good credit score in India, this is where your search ends. This article explains different credit score ranges and what they mean.

300 to 549 (Poor)

This is the lowest range of credit score, which indicates a poor credit history. If an individual has a credit score below 549, he/she may face difficulties in obtaining a loan or credit card. Since there is a higher risk for lenders, such individuals will not be eligible for certain types of loans. And even if the loan gets sanctioned, the interest rate will be very high with not-so-favourable borrowing terms.

Usually, this type of credit score is a result of late repayments or payment defaults. Sometimes, it can be a result of a lack of credit history as well. To improve such credit scores, an individual should focus on making timely payments on any ongoing loans or credit cards.

550 to 649 (Fair)

This credit score range is often seen as fair and indicates a moderate level of risk for lenders. Just like a poor credit score, this score range also results in higher interest rates and limited credit options. However, it is relatively easier for such individuals to improve their credit scores. For this, it is important to make timely payments on any kind of ongoing loans or active credit cards. Other than this, one should also avoid applying for any new debts.

650 to 749 (Good)

A good credit score range starts from 650 and ends at 749. It indicates a decent credit history suggesting that the individual is a responsible and reliable borrower. Generally, lending institutions prefer borrowers with a credit score like this and also offer competitive interest rates with favourable loan terms. To maintain this score or improve it further, one should keep his/her credit utilisation low and ensure timely payments.

750 to 850/900 (Excellent)

A credit score that falls in this range is considered excellent and reflects a b credit history. An individual with a credit score above 750 is a low-risk borrower and is very likely to get low interest rates for future loans. To sustain this credit score, one should continue their responsible credit practices while ensuring good credit management.

Conclusion

Knowing your credit score and understanding its implications is important for you to understand your financial health. This will not only help you manage your finances better but also determine your creditworthiness.

At Muthoot Finance, you can check your credit score online for free. Apart from this, we also offer a number of schemes where you can obtain a loan with a low credit score as well. For more information, simply check the loan scheme section on our official website. Or, you can also visit your nearest Muthoot Finance branch for more information.