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.
