Since they lack firsthand knowledge of the applicant’s financial habits, they rely heavily on the credit score as a key indicator. This score serves as a vital input to help them decide whether to approve the loan, determine the maximum amount that can be granted, and set an appropriate interest rate.
Consequently, the credit score acts as a vital barometer of an individual’s financial health and creditworthiness, guiding banks and financial institutions in their lending decisions.
WHAT IS A CREDIT SCORE?
A credit score is a numerical representation of an individual’s creditworthiness, calculated based on various parameters including their payment history. This score enables lenders to make informed decisions. Typically ranging from 300 to 900, higher scores indicate better creditworthiness. A score above 750 is generally considered ideal by lenders, as it reflects responsible credit behaviour.
Credit rating bureaus are institutions that calculate an individual’s credit score. In India, the Reserve Bank of India (RBI) has authorized four agencies: TransUnion CIBIL, Experian, Equifax, and CRIF High Mark. Among these, TransUnion CIBIL is the most well-known credit ratings agency, benefiting from a first-mover advantage and partnerships with a large number of financial institutions, covering millions of borrowers.
WHAT ARE THE KEY COMPONENTS THAT DETERMINE THE CREDIT SCORE?
• Payment History
この記事は Beyond Market の February, 2025 版に掲載されています。
7 日間の Magzter GOLD 無料トライアルを開始して、何千もの厳選されたプレミアム ストーリー、9,000 以上の雑誌や新聞にアクセスしてください。
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この記事は Beyond Market の February, 2025 版に掲載されています。
7 日間の Magzter GOLD 無料トライアルを開始して、何千もの厳選されたプレミアム ストーリー、9,000 以上の雑誌や新聞にアクセスしてください。
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