What is credit score?

The credit score is a statistical number (three digit number)  that measures the creditworthiness of the borrower and is based on the credit history. I.e.

• The number of open accounts, 
• The total amount of debt, and 
• The history of repayment. 

Lenders use credit scores to determine the probability that the borrower can repay loans in a timely manner.

How to maintain a good credit score

Using your credit wisely and responsibly is what lets you maintain a good ranking.
Following are the key aspects to maintain a good credit score”

1. Know What Goes Into a Good Credit Score

The more you know what's going on with your credit score, the easier it's going to be to keep a good one.

2. Pay Your Bills on Time

Every EMI for a loan, every credit card outstanding should be paid on time.  Any bill you fail to pay on time has an adverse effect on your credit score

3. Manage Your Debt

Payment card balances are not the only accounts that affect your credit score. Loan balances and credit lines can have an effect on your debt rates. Getting too much debt will cost you credit score points. The lower the debt, the easier it is to maintain a decent credit score.

4. Close a credit card with care 

Although you don't need to go overboard to apply for new credit cards, you should be judicious when it comes to closing them, particularly when you've had a credit card for a long time. There may be occasions when you notice that using a specific credit card is very restrictive and you may want to close it.

Benefits of a good credit score

It's important to have good credit. Following are the benefits of a good credit score:

• A strong credit score gives you power to negotiate a lower interest rate on your credit card or a new loan. 
• One of the advantages of getting a strong credit score is that banks are willing to let you borrow more money. 
• Insurance firms use information from your credit report and insurance records to determine your insurance risk ranking, often penalizing individuals who have poor credit scores with higher insurance premiums.
• A good credit history will help you apply for the best credit cards, including low interest rates, rewards and cash back.

Disadvantages of a bad credit score

Following are the disadvantages of a bad credit score:

• Creditors are prepared to consider a certain amount of risk. But, if your credit score is too poor, they do not want to lend money to you. With poor ratings, you can find that your applications have been rejected.
• Your credit score directly influences the chances of obtaining approval for a new loan or application for a new loan. Lower the score, lowers the chance of getting the approvals. 
• Timely payment records and outstanding debt rates are of particular concern to insurers. If you don't stack up on such metrics, you're likely to pay higher premiums than someone with better ratings for an almost similar package.
• Poor credit itself does not contribute to demands for debt collection. It is possible, however, that if you have bad credit, you do have some past due bills that debt collectors are pursuing.

How to start building your credit score if someone does not have any record available in any credit bureau

Credit cards are a very useful form of credit device, and when used wisely, they can help you build up your credit. However, it is important to control the use of credit cards, as credit cards can also be a path to debt if you misuse them. Here are four ways that you can create credit with a credit card:

• Create small payments on your credit card that you can quickly pay off right away, then pay the balance in full each month. It will help create a profile of fair use of credit and timely payment on your credit report.
• If you have no credit history or bad history, it can be hard to get a standard credit card. A safe credit card can be an option. Secured credit cards are typically connected to a savings account, and the limit on the card is generally the amount or percentage of the balance in the account.
• When you're having trouble obtaining your own credit card, another way to create credit is to become an approved user on someone else's account, or to open a joint account with someone who has a strong history of credit.

How and when to apply for a loan

Applying for a bank loan is easier than one would imagine. But before you apply for one, you should be aware of your financial condition, considering that you will have to pay back the loan sum later. For all the paperwork involved and the different eligibility requirements, you must first consider the need, so if you think it's the best way out for you, you can either go to the bank so speak to the loan manager, or go through all that and apply online.

Do the self assessment first (You need to first examine the financial condition )

Check your eligibility criteria (you need to check the requirements)

Proceed with the Loan application (you can apply online for a loan)

Range of credit score when someone should apply for a loan/credit card.

A number of people are refused access to credit cards. And if you get rejected too many times in a year, it might potentially hurt your score. And with strong credit, there are other reasons why you might still fail – like too much total debt, or just even one recent late payment.

Following are the credit scores for your reference:

Score	Status
750+	Excellent credit
700 – 749	Good credit
600 – 699	Average credit
Under 600	Bad credit