10 Questions About Your Credit Score

A look into what a credit score is and what can happen if you don’t keep it high

- Adhil Shetty

1) What is a credit score?

Your credit score is a number that represents your credit worthiness, typically expressed as a number between 300 and 900. It is based on your borrowing history — either through credit cards and loans. There are four major credit information companies (CICs or credit bureaus) in India: CIBIL, Experian, Equifax and Highmark.

2) Why should I care about my credit score?

A good credit score could be the difference between getting or not getting a loan at affordable interest rates. Normally, people don’t hear the words “credit score” or “CIBIL score” until they want to take a loan or a credit card. Unknown to them, their credit activity is being reported by lending institutions to credit bureaus, who will assign them a healthy credit score if you have been prompt in your credit card and EMI payments.If you’ve been negligent with your repayments, your credit history report notes it. Additionally, media reports revealed that e-commerce companies and even recruiters are now checking credit scores as part of their background check of prospective employees.

3) I need a loan soon. What can I expect?

India is gradually moving towards being a marketplace where the interest rate you pay on your loan is proportional to your credit score. This year, Bank of Baroda became the first Indian bank to link credit scores to loan interest rates. If you have a score of 760 or above, you can access BoB’s loans at their lowest rates. Essentially, customers maintaining healthy credit habits are rewarded, while those with lower credit scorers need to pay higher interest rates.

4) When can I see my credit score?