FINANCIAL AWARENESS MESSAGE 9: CREDIT SCORES

What exactly is a Credit Score?

  •  Credit Score (a three digit number) indicates a borrower’s creditworthiness and is typically based on his/her credit history
           and other factors .
  • It is given along with Credit Information Report issued by a Credit Information Company.
  • Credit Score would be higher in case the borrower has always repaid loans taken from banks/financial institutions on time.

 

 

 

 

“Higher the score, the more creditworthy and more responsible the borrower is.”

 

 

Why is Credit Score important?

 

  •  Banks / Financial institutions ascertain/check your credit score and credit history, along with other factors, while sanctioning your loans.
  • All other things remaining the same, a borrower with a higher credit score will usually be able to borrow at a lower rate of interest.

 

 

 

So the question is, how can you improve your Credit Score?

  • Borrow only within your means; i.e. only so much as you can repay regularly & on time.
  • Make sure you do not miss any repayment instalment.
  • Repay loan earlier if you can as it creates good credit history.

 

 

 

Disclaimer : This message is presented as a reading and teaching material with a sincere purpose of making the reader financially literate. It is not intended to influence the reader in making a decision in relation to any particular financial products or services. 

Printed by Reserve Bank of India, Financial Inclusion & Development Department.

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