Chasing the Mythical 850: What is a Good Credit Score?
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A good credit score, usually between 700 to 850, reflects your financial responsibility and creditworthiness. It is important because lenders use it to assess the risk of lending to you. A higher score increases approval chances and secures loans at better terms, indicating your ability to manage credit responsibly and access favourable financial opportunities.
Introduction
If a stranger walks up to you and asks to borrow some money, even the best of us hesitate. What do they need it for? How do you know they will repay you back? Have they borrowed money in the past? Do they have a history of giving it back?
Banks think similarly when we approach them for a loan. When handing out large sums of money to someone, a system is needed to measure that person’s trustworthiness. Your credit history is recorded in the Credit Information Report (CIR), where your trustworthiness of loan repayment is given a CIBIL score.
CIBIL stands for Credit Information Bureau (India) Limited. A good credit score is crucial in India and many other countries worldwide when applying for loans, credit cards, or other forms of credit. A higher credit score increases the likelihood of getting credit approval and enables borrowers to negotiate more favourable interest rates and terms.
Your credit history, repayment behaviour, credit utilisation ratio, credit inquiries, and the types of credit you have used are some factors that influence your credit score not just in India but in many other countries. Maintaining a consistent record of timely repayments and responsible credit management is essential to achieving and sustaining a good credit score. Regularly checking your credit report and rectifying any errors can also contribute to maintaining a healthy credit profile.
What is the CIBIL Score Range?
If you are wondering, “What is a credit score, and how do I get that?” you need to understand what they calculate to get your credit score in the first place.
Your creditworthiness, measured as your credit score or your CIBIL score range, is calculated based on the following:
- Your payment history
- How long was your past credit period (credit length)
- How did you use your loan (Credit utilisation)
- Credit mix
- New credit
You can’t escape being marked and evaluated, even in adulthood. CIBIL score range is between 300-900, but each stratum of this range determines if you have good or bad credit.
| CIBIL SCORE | RATING |
| 300-499 | Poor |
| 500-649 | Average |
| 650-749 | Good |
| 750-900 | Excellent |
The best credit score range is between 650 and 900. So, if you are anywhere above 650 and are wondering, “Is 700 a good credit score?” yes, it is!
Four approved bodies under the RBI collect and hold credit information that determines what is a good credit score. Each of these credit information bureaus in India has unique features and characteristics that cater to the diverse financial needs of consumers and lending institutions:
- CIBIL (Credit Information Bureau India Limited): Established as one of the earliest credit bureaus in India, CIBIL is well-recognized and widely used by lenders. Its credit scores range from 300 to 900, with a higher score indicating a healthier credit history. CIBIL’s reports are known for providing a comprehensive overview of an individual’s credit behaviour and are instrumental in evaluating creditworthiness.
- EQUIFAX:Although relatively newer in the Indian market, Equifax brings a wealth of global experience. It offers credit scores that range from 1 to 999, providing a more extensive spectrum for assessing creditworthiness. Equifax also goes beyond traditional credit reporting, offering additional services like risk management, fraud detection, and portfolio management, making it an attractive option for financial institutions.
- EXPERIAN:Experian stands out for its customer service and consumer-centric approach. Its credit scores, ranging from 300 to 900, provide valuable insights into an individual’s credit history and repayment behaviour. Experian’s commitment to enhancing customer experiences is reflected in its user-friendly interface and tools that empower individuals to manage and monitor their credit profiles effectively.
- HIGH MARK: High Mark offers various innovative services beyond traditional credit reporting. Their credit scores, ranging from 300 to 850, help lenders assess credit risk effectively. High Mark’s expertise extends to geo-analytics consulting, which assists financial institutions in making informed decisions based on location-specific data. This can be particularly valuable for managing risk and optimising lending strategies in various regions.
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In a Nutshell
- CIBIL: One of the oldest and most widely used. Scores range from 300-900.
- EQUIFAX: Relatively new. Scores range from 1-999. It offers additional support like risk, fraud, and portfolio management.
- EXPERIAN:Customer-service-oriented credit company. Scores range from 300-900.
- HIGH MARK:Offers services like geo-analytics consulting. Scores range from 300-850.
Credit Score vs CIBIL Score
Here are the key differences:
| Criteria of difference | Credit Score | CIBIL Score |
| Meaning | The overall score of a person’s creditworthiness. It is determined by several criteria like credit history, loan period, etc. | The creditworthiness score determined by the Credit Information Report (CIR) |
| How it is calculated | An accumulation of the report of a person’s credit history, repayment period, new credit, credit mix, utilisation, etc | An accumulation of other credit reports of that individual. |
| Credit Range | Range varies according to the bureau used to measure | 300-900 |
| Authority | Varies according to the country | CIBIL |
Benefits of a Good Credit Score Range
Your credit score is an aggregate of a few factors:
- Loan history: 35% of your score
- Credit length: 15% of your score
- Credit utilisation: 30% of your score
- Credit mix: 10% of your score
- New credit: 15% of your score
Having a high credit score is not like having high Snapchat streaks – the numbers actually mean something and can make a huge difference to your finances.
Here’s what the best credit score range can get you:
- Lower interest rates on your subsequent loans
- Quicker loan approval with less hassle
- Possibilities of getting a pre-approved loan
- Long-term loans get approved
- Benefits to your credit card, such as higher credit limit and reward programmes
- Higher credit scores portray good credit management and responsibility, which gives you tons of brownie points on your job application or for your rental agreement.
How to Access Your Credit Scores
Your credit score is stored with a credit bureau like CIBIL and can be accessed by lenders to assess your creditworthiness.
To access your credit report in CIBIL, follow these quick steps:
- Go to the CIBIL website
- Hit the bright orange ‘Get your CIBIL score’ button
- Type in the personal details they ask for (like your name, email, phone number, etc.) and upload essential identity documents (like your Aadhaar Card, Passport, PAN, etc.)
- Once that’s done, hit ‘Accept and Continue.’
- Enter the OTP that comes to your mobile number
- Click on ‘Go to Dashboard’, and it’ll redirect you to myscore.cibil.com
- Log in and view your generated credit score.
The process is similar if you have chosen any other bureaus like Equifax or High Mark. You may even use third-party websites (like FitCredit, Cred, PayTM, INDmoney, CreditKarma, etc.) to check your credit score.
Expert Tip:Be sure to check the accuracy of your credit score in case of any fraudulent, incorrect or suspicious activity on your credit.
Building, Improving and Maintaining Your Credit Score
Following are some habits to maintain and improve your credit score:
- A healthy mix of credits in your history (alternates of long-term, short-term loans, big loans, and daily credit card loans, etc.)
- Fast repayment of credit bills
- Being a co-applicant to guaranteed repayers only
- Avoiding multiple parallel loans
- Have a lower credit utilisation ratio (spend less than your credit allows you to)
- Tracking and monitoring your credit dues
If you are starting out on building your credit, here are some tips that will eventually get you to a good credit score:
- Apply for a credit card: a small but effective way to start your credit history
- Use the card regularly and build your credit score
- Be prompt and diligent in your payments
- Pay your EMIs on time and in full
- Track your Credit Utilisation Ratio and keep it low.
Common Credit Score Myths
When you try to understand “What is a good credit score”, steer clear of the WhatsApp-forward level myths that surround building a good credit score range.
- Frequently checking my credit lowers my credit score.
Simply untrue. Checking your score, especially from an authentic credit bureau website, does not affect your credit score in any way. It is safe and even wise to monitor your scores. - My salary impacts my credit. Unrelated. Your salary or income might show your capacity to repay but not necessarily your creditworthiness.
- Only the rich have what is considered a good credit score.
This is like saying all fancy restaurants have great food (not true!). A good credit score means you’re a reasonable risk to loan money to, irrespective of your economic status. It’s a mark of your diligence than your dough (money). - Only 850+ credit scores get any real benefits
Nope. While we can’t deny the advantage of being in the 850+ credit score club, if you can get yours to 750+, you still unlock most of the advantages of having what is an excellent credit score. - Building credit is for growing old
Not really. You can start building your credit at 18 years old and keep strengthening your profile for you to make any milestone purchases such as a house, car, paying for education, etc. - My boss can see my credit scoresNo, they may have access to your financial history to check for distress, but not your actual score. That’s only for lenders.
- I can merge my credit score with my spouse’s when I get married You can merge your name, home, and even your personality with your spouse, but not your credit scores. Your credit score is just yours!
Key Takeaways
Before you skip off to buy your dream home or car on loan, here are some parting tips:
- Start young and build a good credit history
- Keep a check on your credit score
- Repay your loans on time
- Always strive to boost your credit score by being proactive
Best of luck!
Frequently Asked Questions
- CIBIL: 300-900
- EQUIFAX: 1-999.
- EXPERIAN: 300-900.
- HIGH MARK: 300-850
