Credit Scores or Credit Ratings are basically meant to understand the creditworthiness and the ability of an individual to repay their obligations. Every individual desires to have a good credit rating and credit score. Having a good credit score and credit rating is always good for a borrower.
Who issues Credit Scores in India?
The Reserve Bank of India(RBI) has given the authority to the companies that have been registered under The Credit Information Companies (Regulation) Act. This is authorization has been done to provide credit scores or ratings depending on the previous track records that have been reported by various credit institutions and banks.
CIBIL is one among the other leading credit information bureaus of India like Equifax and Experian. Any of these three credit bureaus issue the credit scores. Amongst the others, CIBIL is the oldest credit bureau. An individual needs to provide their data to all the credit bureaus because some lenders use CIBIL and some of them use the other credit bureaus.
Credit Score: A credit score indicates the well being of the credit health of an individual. Higher the credit score of an individual, higher is the creditworthiness of that individual.
Credit Rating: A credit rating will decide whether a company will pay back the debts taken by it.
Who Issues Credit Ratings in India?
Credit Rating is the done to evaluate the creditworthiness of an instrument of an organisation. This evaluation is done by considering the overall risk of the business of a company and the profile that is related to the financial segment of the company. With the help of credit rating, a link is developed between return and risk. Individuals can use credit rating to understand the level of risk that is associated with their financial transactions. Credit rating is usually done by Credit rating agencies.
Important Points About Credit Rating:
1. It is a judgement of the intention of a borrower and their repayment ability.
2. Credit rating is not meant to recommend the sale, purchase or holding of the security of the borrower. It is just an opinion that helps in taking the decision to sell or purchase the security of the borrower.
3. The credit rating agencies usually change ratings only for the purpose of important as well as perpetual changes in the financial and operational segments of the company.
4. Credit rating agencies known to rate the securities and not rate the issuers.
How can You Get Your Credit Score?
The following steps are to be followed in the process of getting your credit score.
1.Upload all the necessary information to any of the credit bureaus
2.You can also log on to the website of either of the credit bureaus and request for the getting a credit score.
A bad credit rating and score should be completely avoided by any individual. This is because whoever has a bad credit rating and bad credit score is in a risky situation. However this situation can be avoided by making all the payments on time and not defaulting on any payment that is due.
Credit scores are calculated depending on certain factors which are as follows
1.Credit Utilization
2.Individual’s Recent Activity
3.Credit history’s length
4. Outstanding Debt
5.History of Payments made by an individual
The factors listed above are useful in improving the credit score in different ways and using various techniques. Considering these factors an individual can work upon their credit score and improve it in such a way that their loan or credit card applications are approved in an easy manner without any hassles in the loan approval process. Therefore it is to be noted that maintaining a good credit score is essential for an individual to have a good and secured future from financial point of view.
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