A good credit score is a numerical representation of a person’s creditworthiness. This score is determined by a variety of factors, including payment history, amount of debt, and length of credit history. A good credit score is generally considered to be anything above 700. This blog explains the importance of having a good credit score and how it can affect your ability to borrow money and access credit. Having a good credit score can also save you money on interest rates and make it easier to get approved for loans and credit cards.
What is a Good Credit Score?
Credit scores from 750 to 900 are considered excellent. A good credit score can help banks and other financial institutions decide whether to lend money to a borrower. A low credit score, on the other hand, can prevent a borrower from accessing many credit-based opportunities and benefits.
The table below outlines the implications of different credit scores for borrowers, providing insight into their credit score health and whether they may need to take steps to improve their score:
|Credit Score||Credit Score Health|
|300-549||Poor credit score|
Demonstrates irregular payment behaviour
It provides information on late or missed credit payments.Shows a greater reliance on credit
Chances of becoming a defaulter
|550-649||Fair credit score|
Shows irresponsible credit payment behaviour
Shows borrower’s multiple hard inquiry attempts (if any)
|650-749||Good credit score|
Shows responsible behaviour when it comes to credit or loan EMI repayment
Eligible for credit and loans
Low risk of turning into a defaulter
Reasonable interest rate is charged against the loan, however, the borrower will not get a higher credit limit
|750-900||Excellent credit score|
Little to no chance of becoming a defaulter
Highlights responsible credit repayment behaviour
Shows no default payments made
Error free credit report
Lower rate of interest
Higher negotiation power
Borrowers with a credit score in the excellent range are likely to have access to the best credit products and terms, while those with a poor or very poor credit score may face challenges in securing credit or may be offered credit with less favorable terms.
Factors that Affect the Credit Score
There are numerous factors that influence a borrower’s credit score; however, it is the borrower’s responsibility to work continuously to improve it. The following are a few factors that affect credit scores and, if left unresolved, become a hindrance in the loan or credit card approval process:
- Poor/bad repayment history
- Higher use of credit utilization ratio
- Numerous multiple hard inquiries within a particular period of time
- Comments/error/issues in the credit report
- Outstanding balance
- Multiple partially settled payments
How to Improve Credit Score?
To improve your credit score, you should be strict and responsible about credit repayment. Some steps you can take to maintain or regain a good credit score include:
- Make on-time credit payments to avoid late fees and damage to your credit score
- Use credit utilization ratio wisely to avoid maxing out your credit cards
- Avoid conducting multiple hard inquiries, which can negatively impact your credit score
- Maintain a balanced mix of secured and unsecured loans to show lenders that you can handle different types of credit
- Resolve any errors, issues, or comments on your credit report to ensure that your credit score accurately reflects your creditworthiness
- Take comments on your credit report seriously and address any issues promptly
- Avoid partially settled payments, as they can indicate financial difficulties and damage your credit score
- Don’t leave outstanding balances on your credit cards, as this can increase your credit utilization ratio and damage your credit score
- Set reminders for yourself to make sure you make your credit payments on time
- Determine the amount of credit you need and the number of expenses you can manage to avoid taking on more debt than you can handle.
These are some of the methods a borrower can use to regain and maintain a good credit score. Furthermore, it is recommended that the credit report be thoroughly reviewed, preferably twice a year and that the credit score be checked on a regular basis.
How to Check Credit Score on Paytm?
There are numerous ways to check your credit score online. One such method is to use the Paytm mobile application to check one’s credit score. Paytm enables a borrower to quickly check his or her credit score in minutes without having to enter too many details. Here’s how to check your credit score using the Paytm mobile app:
- Login to the Paytm mobile application
- Navigate to ‘Loans and Credit Cards’
- Click on ‘Free Credit Score’
- Check your credit score for free!
Paytm allows borrowers to view their detailed credit reports. The report provides a brief overview of the overall factors that may have influenced the credit score collectively. Additionally, you can also find various tips to improve your credit score.