In the present day, consumers, purchasers, and even businesses all are high on credit. Having an excellent credit score is a must because the entire system of credit availability depends on a good credit score. Whenever a consumer or business takes a loan from Banks/NBFCs, all such loans are reported to credit bureaus authorized by the Reserve Bank of India. There are 4 credit bureaus authorized by RBI i.e., Equifax, TransUnion CIBIL, Experian, and CRIF Highmark. Each credit bureau assigns a three-digit number that is based on credit history including repayment and is referred to as a credit score. Every credit offering organization employs a different process to assess financial aspirants while approving the credit facility.

A credit rating of 700 or above is generally considered good. Minimum credit scores may be required to avail of a loan from different lenders. Having a high credit score makes getting a loan with favourable terms simpler, such as lower interest rates and higher credit limits.

The "D factor" in the loan industry is the credit score
Credit scores help lenders identify a borrower's credibility to repay loans or credit cards and to set credit lines and the interest rate. A bigger loan limit and a reduced interest rate are both possible for borrowers with good credit scores.

Credit scores help lenders identify a borrower's credibility to repay loans or credit cards and to set credit lines and the interest rate.

Your credit score is based on several factors, they are
The entire process of calculating a person's credit score is guided by a complicated algorithm; there are several things taken into account while arriving at the credit score and a few of them are as under:

● Payment history: A person's payment history is one of the most significant criteria that affect their credit score. Credit scores are a measure that lenders use to determine the risk involved in offering a loan to a specific borrower. As a result, regular loan/credit card payments can assist in raising a person's credit score and raise their likelihood of receiving future credit or loans.
● Credit utilization: The credit utilization ratio, which is the second-most important element affecting credit score, measures how much credit has been used overall in comparison to the credit limit that is available. One should not use more than 50% of your credit limit as raising the same might hit your score.
● Credit length: A good, extended credit history always influences the rating.
● Credit availability: If you have a variety of credit options such as credit cards, auto loans, and mortgages, it will always help you in improving your credit rating.
● Credit checks: This element may indicate active credit-seeking behavior. One should always remember that requesting credit too frequently or multiple queries from a financial institution might negatively impact your credit score and borrowing as a whole.

“The credit utilization ratio, which is the second-most important element affecting credit score, measures how much credit has been used overall in comparison to the credit limit that is available.”

Crucial hygienic elements that might enhance credit score
There are many options available if a person is struggling with a poor credit score or wants to improve it and they are:

● Pay your EMIs on time: This is important because a customer's payment history makes up the majority of their credit score. If you're using a lot of your available credit, try paying off your debts to lower credit utilization and improve your credit score. To make sure of timely payments, you can also opt for an auto-debit facility and maintain a balance in your bank account. This will save you from being a defaulter.
● Avoid too many credits at once: Your credit may be harmed if you apply for too many loans or credit cards at once.
● Regular check-ups for credit reports: The score may occasionally be negatively impacted by mistakes on credit reports. Always make a careful examination of the report for any inaccuracies.
● Use credit cards responsibly: Avoid using credit cards excessively and accruing more debt than you can manage. Prudent credit use can help build a positive credit history and increase the rating over time.
● Keep previous credit card accounts open: The length of a person's credit history is important in determining their credit score. Keeping older credit card accounts open will help you build a longer credit history, even if they aren't being used.
● Secured credit cards as an option: If a person has no credit history or a poor credit score, a secured credit card can help them build credit by encouraging timely payments and limiting credit usage. A secured credit card is nothing but a credit card that is secured with collateral.

In conclusion, maintaining basic financial hygiene will help any individual achieve objectives and plans while keeping credit ratings in line with industry norms. A good credit score plays a crucial role in getting your future loan approvals at the best interest rates.