What is Credit Score
A credit score is a measure of an individual’s ability to pay back the borrowed amount. It is the numerical representation of their creditworthiness. A credit score is a 3 digit number that falls in the range of 300-900, 900 being the highest. You should always work towards reaching a credit score that is close to 900.
A higher credit score offers you several benefits and helps you at the time of getting a loan or a credit card. Having a low credit score suggests you have not been a responsible borrower and have been slacking off repaying the borrowed sum.
Credit scores are calculated by the credit bureaus in the country after taking into consideration several factors like the length of your credit history, repayment records, credit inquiries, among others.
When you apply for a credit card or a loan, lenders like banks and non banking finance companies check your credit score to see whether you have the ability to repay the credit.
If you have a higher credit score, you are entitled to receive preferential pricing and get discounts on the interest rate. Moreover, a high credit score gives your the additional power to negotiate for better rates of interest on loans.
Credit Score Range and What It Means
A credit score ranges between 300-900. You should always take measure to bring your credit score closer to 900.
A higher credit score increases your chances of getting a good deal on loans as well as credit cards. Let’s take a look at the different credit score range:
- NA/NH : In order to calculate your credit score, you need to have a credit history. If you have no credit history, your credit report will mention that your credit score is NA (Not Applicable)/NH (No History).
- 300 -549 : AA credit score in this range is considered as a bad credit score. It suggests that you have not been a responsible borrower and have defaulted payments and have unpaid dues.
- 550-649 : A credit score in this range is considered as average. You will need to take measures to improve your credit score.
- 650-749 : A credit score in this range is considered as good and lenders will consider offering you credit in the form of a loan or a credit card. However, you might still not be in the position to negotiate a good deal.
- 750-900 : With a credit score in this range, lenders will be willing to offer you a loan with cheaper interest rates. A credit score in this range also gives you the additional power to negotiate for a better deal on interest rates and credit cards with better rewards and benefits.