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Demand and supply principle work in each civilization may be the oldest one of India or any other country. Men were animals until they started living and sharing things and turned into a social animal. Apart from human beings, all others are still in animal age and the human being with a brain to work for a good living came to this digital age. As life and civilization progress different requirements pop up and were established for mankind and good living. The banking sector is one such requirement that was raised and developed according to the need of people for the betterment of society and individual financial health.

Since the banking sector apart from maintaining accounts heavily depend on loan and credit card services. The major monetary gain comes from the rate of interest charges for all secured and unsecured loans. For all these services banks have laid down various eligibility criteria and one has to walk through these criteria to get things done. One of such eligibility criteria is Credit Score. The higher the credit score the higher chance of getting things done from the bank. 

Credit Score

A credit score is the meter of your financial health. Financial stability and steady earning is the sign of a good financial heart but in any case, the incoming flow of earning and the outflow of expenditure shows a gap then you will have high blood pressure so you have to maintain your Score. Credit score illustrates financial status with the details of financial transitions and your capability for future expenditure analysis. 

It is three magical numbers which indicate your Credit Standing and this score leads to the loan or financial transition approval of any individuals or any enterprises. When the magical number is hitting below 500, it indicates to the service provider bank that the bank money is at risk as the client is not positioned to repay the given amount. This also summarizes that the client is not paying sincere interest in performing his or her financial liabilities responsibly. In this case, any lender thinks that his money return is at risk and then he will not lend you the money. In another case, if your credit score is above 700, this means your financial standing is sound and you are paying your liabilities well in time. The lender is always open to going for financial business in such cases. This score indicates the potential financial risk a banking lender or bank has to take before lending you the money.

Credit Score Chart

Credit Score	Grading
800 and above	Excellent
600 To 750	Good
600 To 500	Average
500 and below	Poor & Negative

Reserve Bank of India has given license to four companies for managing financial data. All the banks and financial institutions are bound to share the information on a regular basis.

 Four Licensed companies are:

1. CIBIL
2. Equifax
3. Experian
4. High Mark

CIBIL became the first company and started managing financial and credit information in 2001. This CIBIL Score is called Credit Score and ranges generally between 300 to 900. This 4-credit information RBI-approved companies have various different-different features.

Advantage of Credit Score

We are living in such a rapid area where life takes a turn very quickly, so to maintain the calmness of life it is always advisable to have a good financial track record. It is the same that you do bundles of things to maintain your body fitness, in the same way, maintain your financial standing by delivering your financial responsibilities sincerely in time. By doing this you are holding your credit score steady showing courage to go upward. So it is important that your credit score should be healthy, fit and fine.

a. For secured loan approval

A secured loan is secure from the lender's perspective as a client is lending him security against the loan but if a client thinks that it is easy to get a secured loan simply because he is lending him security against the loan. This is not true before going for any kind of financial relation bank checks your credit record and credit score and then only moves further. A high credit score means the bank will approve your loan quickly.

b. Quicker approval of unsecured loans

An unsecured loan by name is unsecured but one will get approval in just 24 0r 48 hours if your credit score is steady and touching 800+. But if your credit score is below average touching 300- then it is impossible to get the loan file to approve. Like personal loans, for instance. For a borrower with a high CIBIL score (say 750+), it is easier to get it sanctioned. 

c. Negotiation Power

Nowadays, to attract more customers, banks are coming up with various attractive schemes which give relaxation in their eligibility criteria. And avail this relaxation it is mandatory that your financial record should be above excellent. If your financial track record is excellent then only you can negotiate for a low Rate of interest, flexible repayment, approval time, and waving off extra charges. It is very much clear that you can negotiate with the bank only when you are qualifying all the eligibility criteria including credit score.

d. Plastic Money Power

Plastic money is e-money power with an instant solution but actually, traps you if you will not use it sensibly. It is important to mention that all money you spend on these cards needs to be paid by your pocket, so you better know how much pressure your pocket will bear. Failing in timely repayment leads you to a below-average credit score. So it is advisable to have one or two credit cards, too many credit cards means too many responsibilities on your financial outflow. Less e-money power is always good for a stable financial life.

Factor affecting credit score

a. Repayment history

Repayments need to be in consideration while going for any type of secure and unsecured loan. As we know the credit score heavily depends on repayment history we should maintain this with full responsibility. The lender always explains to you the schedule and amount you are paying, so it is sensible to think twice while going for any financial engagement. Delay in payment or not paying your account heavily while companies calculate your credit score.

b. Drastic increase in credit

As our financial status is regularly watched by financial institutions so it advisable to maintain our credit limit. This is the limit that we have created according to what we earn. Any route change from the self-restrict limit gives its impression on credit score. When we suddenly start spending more, then we see reduced credit scores. So you have to think, plan and then spend. 

c. Debt to Income Ratio (DT-*I)

The bank/ lender doesn’t encourage people to take loans for around 40% of the income. Debt to Income Ratio is the ratio that is generated from income and financial burden and if one follows these rules he or she will never fall in necessary burden. 

d. Numerous existing loans

Too many financial responsibilities mean too many repayment schedules to follow. Having a mix of secured and unsecured loans is a burden to your pocket. Additional expenditure will always take focus away from the repayment schedule to avoid any negative entry, close smaller loans and then go for another loan.

Read More:- 

1. 6 Ways You Can Boost Your Credit Score Post Covid-19

2. How Self-Employed People Can Improve their Credit Score

3. Top 5 Credit Score Myths that Need to be Busted Before 2022

4. Top 10 Best Ways to Improve Your Credit Score

5. How Does One Late Payment Affect Your Credit Score?

6. What is the Minimum Credit Score Required For a Personal Loan