Credit Score – The personal score that is formed as a result of the collection and analysis of all financial history and relations with banks by a joint institution (Credit Registration Office) is called “Credit Score”. The credit rating obtained is used by financial institutions as the most important criterion in the evaluation of new loan applications and other financial requests.
The term credit score is also sometimes used as a credit rating or credit score range, but basically they all mean the same thing.
Table of Contents
How is Credit Score Calculated?
| Components that Make up a Credit Rating | Percentage |
|---|---|
| Loan Payment Scheme | 35% |
| Current Loan Debt Status | 35% |
| New Credit | 11% |
| Credit Usage Density | 10% |
| Other Factors | 9% |
The credit rating is created by CIBIL ,a numerical summary of your CCR and Company Credit Report (CCR) is the record of your company’s credit history. As can be seen in the table, 70% of the credit rating consists of “credit payment scheme” and “current credit debt situation”. For more detailed information on this subject, see our article on How to Calculate a Credit Score .
Also Read : What are Credit Reports and why check them? Explained
What Should Your Credit Rating Be?
The question that many people first wonder about credit rating is ” how much should my credit score be in order to be able to use credit “. The answer to this question varies according to the bank applied for and income status. However, to make a generalization, those with a credit score above 1,000 may be considered eligible for a loan.
| Credit Rating | Risk Group | Credit Availability | By surety or mortgage |
|---|---|---|---|
| 0 (Zero) | Risky | Income Dependent | There is a Possibility to Use Credit |
| 1-699 | Most Risky | Very low | Very low |
| 700-1099 | Medium Risk | Low | There is a Possibility to Use Credit |
| 1100-1499 | Low Risk | Income Dependent | There is a Possibility to Use Credit |
| 1500-1699 | Good | High | Generally Not Requested |
| 1700-1900 | Very good | Very High | Generally Not Requested |
*The table was created as a “generalization” for information purposes only, based on the data of users who applied for loans to banks.
How to Increase Credit Score?
In order to increase your credit score, monthly loan and credit card payments should be made regularly. Other than that, what they can do is:
- You can configure monthly loan payments according to the budget,
- Debts can be consolidated into a single loan,
- Care should be taken not to delay the credit card minimum payment even one day.
How Can Those With Low Credit Ratings Take A Loan?
The factors that will increase the probability of using a loan are that those with low credit ratings should research the banks that are relatively flexible in their credit rating evaluation before applying for a loan, and show a guarantor or mortgage to the banks in order to have additional collateral.
Does Applying for a Loan Lower Your Credit Score?
Applying for a loan does not lower your credit rating, but applying too much can create a negative impression on banks. For example, the situation of a person who has made 10 loan applications in a month may be considered as “risky” by the banks and the loan request may not be approved.
When is the Credit Rating Renewed?
If you want to improve your credit rating, first of all, if you have irregular payments, you should arrange these payments. Other than that, what you can do is:
- You can configure your monthly loan payments according to your budget,
- You can combine your debts in a single loan,
- You should never delay your payments.
Benefits of Keeping a Good Credit Score
The development of the data forming the credit rating day by day caused the credit score scoring and analysis to become more realistic and accurate. Therefore, lending institutions started to give a greater share to the credit rating among the credit evaluation criteria. For this reason, people with good credit scores had various privileges in financial institutions. Privileges of people with good credit scores in financial institutions:
- The privilege of borrowing with low interest and long term,
- Quick and easy creation of a sense of trust in the commercial relationship
- To become the preferred customer,
- The advantage that the terms of cooperation can be stretched more easily,
- Personalized product offers,
- Differentiation in service quality,
Don’t Deteriorate Your Credit Rating By Missing Your Payments!
In case of difficulties in loan and credit card payments, it is the ideal method to combine payments without spoiling the credit rating. If a restructuring request is made after the payments start to be delayed, approval from financial institutions may not be obtained due to a low credit rating. In order to avoid this situation, it is useful to examine the terms of the debt consolidation loan.
Learning Credit Score
You can find out your credit score in two ways:
1. Credit score can be learned through CIBIL . CIBIL Rank is a numerical summary of your CCR and Company Credit Report (CCR) is the record of your company’s credit history and a credit rating can be learned for a certain fee.
2. Credit rating can be learned through banks. Many banks offer the credit rating inquiry process to their customers. You can learn your credit rating by going to bank branches, or you can get a credit score and or report via internet banking for a certain fee.
Also Read : Credit Score | Factors affecting Credit Score Explained