Does all the hype on Credit Score justified? Do I really need to have a good score?

08-Sep-2016 written by : FSI-Team

As kids we all wanted to excel in our exams and show off our good scores in our report cards. Our teachers and parents always encouraged us to do better and aim higher. As a result we were made to pay attention to the littlest of details and keep a check on our own actions at all times. Who knew that it would actually serve as a foundation for a self monitoring and disciplined life? Apply all these learnings to finances and you will be all set on the right track.

In today's world to get even closer to fulfilling any of our desires, we need a lot of money. Be it a car, a house, a vacation abroad, education in a premier institute or to start a business we need help of money from creditors. All creditors check your credit score before they extend any financial help to you. Even when you apply for credit card, your CIBIL is checked.

My Score – My friend or My Foe?

A credit score is the acid test to indicate any borrower's debt handling ability. It is a three digit number anywhere from 300 to 900. The higher the number, less risky you are considered by the lenders while the lower the number, more risky you are perceived to be. Goes without saying that you can turn your score into a friend. How? Let us guide you on this.

The Dramatic impact

A good score will spell into lower interest rates. You see, banks and other lenders like to do business just like any other businesses. They would want a less risky partner with a high probability of returns. A good score is nothing but an indication that you are less likely to default on your repayments. Thus your credibility is high. Banks would be duelling for your business. You can take advantage of that competition and negotiate for lower rates of interest.

Low interest rates mean lower EMIs. This means you have more disposable income. And that boils down to more saving. So you can go on a holiday without borrowing more funds for it or put it aside for future or invest it or do whatever you would like to do with this extra saving. Sounds cool, doesn't it? And the best part is it can be a reality.

There is a direct trade off between risk and returns. So if the risk is high, lenders expect a higher return in lieu of it. A higher return means a higher rate of interest. So, if you have a score of let's say 640-650, you may be given a loan but with a higher rate of interest than what is available to someone with a score of 750 or more. This can seriously dent your monthly budget. Learning of methods to increase CIBIL score is in your own "pocket-friendly" interest.

Good score means a good job

There is already a tendency among employers in India to do a CIBIlL check before they indulge in any business with you. Once they see your credit score and if it's poor, they will extrapolate your characteristics and draw conclusions like you must be as irresponsible with your job KRAs just as you are with your funds and that you would be able to add little value to the company. Rejected. You can really turnaround this impression through your score.

Once an employer looks at your credit report and notices a remarkable credit history and a commendable score, they shall assume that you must be as good with your job obligations and will serve to be an asset to the company. Sealed. You land yourself a job easier with a good score than with a poor score. Thus, there is all the more reason for you to be careful with your score.

A CIBIL Score is fragile

Your score should be handled with care as it is very delicate. What we mean by this is that incase you do not know how to look after your score, you may end up causing harm to your own score without even knowing it. Thus it is clear that you must be aware of what factors, rather which of your actions, will have a positive impact on your score and which will of those will have a negative impact.

If you have spotted some errors in your report and are worried on how to clear CIBIL issues, then you can get online, go to and raise a dispute. If you still find that your case needs expert attention, then you must seek the services of financial consultants and credit repair companies who can guide you appropriately. Many of such corrections may help your score escalate some points.

In the end

Credit score is an international concept which has been recently adapted in India. There is still quite ignorance about it. However, we do expect that very soon in India too insurance companies, landlords, telecos etc may check your score. Abroad, insurance companies offer lower premiums to people with higher credit scores, landlords are willing to rent out to those who have good scores and even telecos offer better service plans to them. It only seems obvious that a good score is a good thing.



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