What is Credit Score?

A credit score is a statistical number that depicts a person’s creditworthiness. A credit score is a numerical expression based on a level analysis of a person's credit files, to represent the creditworthiness of an individual. A credit score is primarily based on a credit report information typically sourced from credit bureaus.

Lenders use a credit score to evaluate the probability that a person repays his debt to mitigate losses due to bad debt. Lenders use credit scores to determine who qualifies for a loan, at what interest rate, and what credit limits. Lenders also use credit scores to determine which customers are likely to bring in the most revenue. The use of credit or identity scoring prior to authorizing access or granting credit is an implementation of a trusted system.

The higher the score, the more financially a trustworthy a person considered to be.

How to improve your credit score

Financial institutions and banks rely heavily on your credit score while granting new or enhanced credit/loans. It is important to have a good credit score when applying for a loan. Here are ways to do so.

Paying EMIs, credit card dues on time

Pay EMIs and credit card dues before the due date. If for any reason it is not possible to make timely payments, contact the lending institution and seek a restructuring of the loan. You can set up alerts for due dates or register an auto debit instruction with your bank to deduct the dues before the due date.

Using credit card wisely

Not only the minimum amount due, but the whole amount outstanding for the period should be paid before the due date in order to ensure a good credit standing. Also as a habit, it is always prudent to use one’s debit card instead of credit card for making daily purchases and expenses.

Checking for discrepancies

It is important to keep a track of one’s credit report and check if there are any discrepancies. in case of a joint loan application. It is important to check the joint holder's score before hand.

About Author- Purushotam Baheti Purushotam is core team member of Clicbrics technical team. He has great interest in blogging.