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How to check your credit score

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Last Updated: Jun 19, 2020, 12.29 PM IST

Summary It is important to know your credit score while applying for a loan from a bank or any other financial institution.

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Even housing finance companies offer better interest rates for those with higher credit scores.
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One of the factors that determines whether a bank will lend to you or not is your credit score. To know the credit profile of a borrower, a bank gets the credit score and asks for credit report from the one of the credit bureaus in the country.

As per the Reserve Bank of India (RBI) guidelines, the effective interest rate to be charged on a loan taken by an individual from a bank will be calculated as follows: External benchmark rate + spread (margin) charged by bank + risk premium.

Different banks have different criteria for determining risk assessment for borrowers. Some banks have their own internal risk assessment teams while other banks rely on the credit score of the borrower.

Even housing finance companies offer better interest rates for those with higher credit scores. For instance, LIC Housing Finance announced a lending rate of 7.5 per cent for new homebuyers with CIBIL score of 800 and above.

  1. What is credit score?
    Credit score is a three-digit number denoting the creditworthiness of an individual. The credit report also indicates the credit behaviour of an individual by stating whether he pays his bills, equated monthly instalments (EMIs) and other dues on time.
  2. How to generate credit score
    One can check the credit score via a credit bureau such as TransUnion CIBIL, Experian, Equifax etc.
  3. Are there any charges for generating credit score?
    The charges for generating credit score vary from one credit bureau to another. As per RBI guidelines, the credit bureaus are required to provide a free credit report and credit score once a year between January and December.
  4. What is the difference between credit score and credit report?
    Credit score is a number which denotes the creditworthiness of an individual. On the other hand, credit report contains the detailed breakdown of an individual's credit history.

  5. What is the range of the credit score?
    Credit score usually ranges between 300 and 850. An individual should remember that higher the credit score, higher will be the creditworthiness.

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