What is a Credit Score: Importance, Calculation & Maintenance (2024)

You’ve likely heard that your credit score is a crucial factor in banks’ decisions to approve or reject loan applications. According to OneNDF, a CIBIL score of 700 or above is considered ideal by most banks and NBFCs for business loans. In this article we’ll be discussing what is a credit score, ideal credit score for loans and how to maintain a good credit score?

OneNDF, a leading digital loan marketplace with over a decade of experience, provides financial solutions for various needs, including Unsecured loans, Loan Against Property (LAP), working capital, invoice discounting, PO financing, and equipment financing. The platform also assists businesses in accessing loan facilities from banks, even if they were previously denied due to poor credit scores. You can find our credit score card report here.

What is a Credit Score?

A credit score, is a numerical representation typically ranging from 300 to 900. It reflects a person’s creditworthiness or their ability to repay debt. Your credit score is based on your repayment history and credit files across different loan types and credit institutions. In India, there are four licensed credit information companies: Credit Information Bureau (India) Limited (CIBIL), Experian, Equifax, and Highmark.

Suggested Read: Top credit bureaus in India

Your credit score is indeed crucial when applying for loans, both for personal and business purposes. However, Banks & financial Institutions consider a range of factors beyond just the credit score when assessing loan applications.

For business loans, lenders may look at the promoter’s credit score, but they also consider factors such as the business’s income, rental and other income sources, banking behaviour (like average balance, cheque returns), existing debt, current year GST data, property value, and more. These factors provide a more comprehensive picture of the borrower’s financial health and help lenders make informed decisions about loan approvals.

One must note that landlords, insurers, and employers often use credit information as a litmus test to know if the people they are dealing with are reliable and responsible. Bad credit can portray you as a risky bet.

Ideal Credit Score for Different Loans

How is a Credit Score Calculated?

A credit bureau consolidates your past credit history and repayment behaviour to provide a detailed report to lenders. The credit score ranges from 300 to 900, with 900 being the highest score possible. Five important factors are considered when calculating your credit score:

• Repayment History
• Credit Utilization Ratio (CUR)
• Age of credit lines
• Composition of your loan portfolio
• Number of credit inquiries made about you

How to maintain a Good Credit Score?

To maintain a good credit score, consider the following:

• Timely payment of monthly EMIs
• Debt repayment on time or before the due date
• Avoiding unnecessary credit extensions and new credit cards
• Not ignoring overdue bills
• Limiting the number of credit card applications
• Regularly reviewing your credit reports for errors

Check credit score free with OneNDF

OneNDF offers a free credit score check. Simply visit our website, fill in your details, and get your credit score. Without any cost, unlock the best loan terms based on your unique profile.

Moreover, at OneNDF, we facilitate a soft pull of credit check with our credit bureau partner, Experian. A soft pull means that checking your credit score through our platform will not count as an inquiry and will not affect your credit score. You can check your score as many times as you want without worrying about it impacting your creditworthiness. We understand the inconvenience of having your score affected simply due to checking it for general purposes, not for applying for a loan.

Why Choose OneNDF?

Since its establishment in 2013, OneNDF has emerged as the go-to platform for businesses seeking credit facilities or loans. The company has disbursed over Rs 3,000 crore in loans, including working capital credit facilities, and has empowered over 2,000 businesses. Here are the reasons why OneNDF stands out as the best platform to check your credit score:

• Expert Tips: OneNDF provides not only tips to improve your credit score but also guidance on enhancing your complete credit profile.
• Soft Credit Inquiry: Our platform conducts a soft credit inquiry, which does not impact your credit score negatively.
• Free Extensive Credit Health Report: You’ll receive a comprehensive credit health report at no cost.
• Tailored Offers: Benefit from tailored offers from our network of over 100 funding partners.

FAQs On Credit Score:

Is there a difference between a credit score and a credit report?

Yes, a credit score is just a part of your credit report. Your credit report includes your complete history of dealing with credit, including your payments history (on time or delayed).

How is the CIBIL Score different from the credit score?

The CIBIL score is calculated by The Credit Information Bureau (India) Ltd. While a credit score can be provided by any of the four credit bureaus in India, a CIBIL score can be provided only by CIBIL.

How can a good credit score help someone with a loan application?

A good credit score indicates good financial health and increases the chances of loan approval.

How much will it cost me to get a credit score?

Each credit bureau has its own cost for providing a credit score. However, at OneNDF, we offer a free credit score and suggest ways to improve it.