Credit Score Risk Grades: All those who have taken a loan or are thinking of taking a loan, all of them must be aware about the credit score. How important is the credit score for a loan? What is its importance? It is important to understand this. People usually say that your credit score affects the interest rate of your loan. A good credit score gets you the best loan offers at a low interest rate.
If your credit score is low, you get a loan at a higher interest rate. Banks and companies that provide loans give loans according to the risk grade. Those who have a low risk grade get loans at a good interest rate. Let us tell you what is the connection between risk grade and credit score. How is it calculated? How does this increase interest and what can you do to reduce it.
There is a problem with credit score in the beginning
If you have not taken any loan or got any credit card, then you are an NTC i.e. new to credit. Your CIBIL score is assigned to you as 1. But if your credit history is very short. Suppose it is less than 6 months. Then your CIBIL score can also be zero. But this is not a bad thing because everything starts from zero.
But because of this you have to face temporary challenges. Banks provide you loans at a higher interest rate than a good credit score. If we compare, an NTC i.e. new to credit person gets an interest rate equal to a CIBIL score of 700 to 749.
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get above 750 Best Offer
A CIBIL score above 750 is considered an excellent benchmark. If your CIBIL score is higher than this, most lenders give you loans at a good interest rate. However, this can vary according to different lenders and banks. Some lenders consider 800 or 810 as a good benchmark. Those whose CIBIL score is this much are called super prime borrowers.
Those whose financial condition shows their high credit ability. Those who make payments on time and manage their loans properly. Achieving this credit score is not a difficult task. You should have a mix up of a secured loan like a home loan and an unsecured loan like a credit card. By paying these loans on time, you can come under the category of super prime.
If it is less than 750 then you will have to work hard
A credit score of 750 occurs when you do not have experience of using credit. You spend too much of your credit limit. And maybe some payments are not made on time. They become late payments. That is why you should be careful. If you correct your credit habits, you will reach above 750 in no time. But if you again make late payments and use your credit limit more, then your credit score can go even lower.
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Signs of trouble less than 700
If your credit score has reached around 600. Then apart from late payment, there are many other problems due to which this has happened. It is possible that you have defaulted on a loan and have taken a loan settlement offer from the lender. This situation is not good. Because if you take a loan on this credit score, you will get very high interest rates. Because you will be seen as a high risk borrower. Due to which loan lending companies and banks will give you loans at high interest rates.
The way to avoid this is that you have to pay your entire previous dues. Along with the entire processing fee, penalty and interest rate. Along with this, you also have to ensure that all the payments you make in the future are made on time. During this time, you must check your credit score once every month so that you know.
It will be difficult to get a loan for less than Rs 600
If your credit score has fallen below 600, then the reason for this could be default and along with it your negative credit history. Banks have a risk grading system due to which banks may not give you a home loan. But the rules of letters are different in non-banking financial companies. You can get a loan from there. But for that you will have to pay a lot of interest.
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