We see it everywhere. “Check your credit score for free”, “Credit Score check in just a min.” What’s all the fuss about? Let’s find out.

What’s a credit score?

To put it simply, the credit score is the adult version of the 10th standard marksheet. It’s the measure of your creditworthiness, much like how your 10th marks were used to figure out how much of a “good boy/girl” you were.😒

The credit score or the more apt CIBIL score is given to you by the TransUnion CIBIL company after analyzing your credit information. The score takes into account the number of open accounts, your total level of debt, your repayment history( do you pay on time), your duration of availing credit and other factors. 

Importance of the Credit Score

Did you have a curfew as a kid? Or were you one of those kids whose parents trusted you completely? 🤯 That’s the crux of the credit score too- dependability. It shows how dependable or risky you are as a borrower. It helps financial institutions understand whether you will pay on time/regularly when you take a loan from them. Especially personal loans and other loans that don’t need security.

Credit score affects 3 things

  • Your eligibility for a loan
  • The maximum loan amount you can borrow
  • The interest rate on your loan

How to read your credit report

The simplest way is to check the CIBIL score which falls in the range of 300-900, with 900 being the most creditworthy. Having a score of 750 and above is considered good, any score below 750 will make it harder for you to get a loan. Other components of a credit report include –

  • Credit Summary
    It shows all the credit accounts you hold currently and you had in the past. This will include credit card accounts, home loan accounts, etc…
  • Account History
    This part of the report gives details of all the accounts given in the previous section.
  • Public Records
    This part of the report deals with major financial mishaps like bankruptcy and criminal arrests.
  • Credit Enquiries
    Here they show every time a financial institution has looked up your credit report in the past 2 years.

So, as you can see the Credit Score is a comprehensive document that helps lenders trust you with their money. And unlike your 10th marksheet (which is of no use to you until you change your job🤦‍♂️), the credit report will be useful to you throughout your adult life.

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