A credit score above 800 has several advantages. Loans can be borrowed instantly at a lower interest rate. Banks and other financial organizations readily accept applications. A credit score above 800 can result in a substantial savings of interest amounts in the long run. Very few citizens in India have a credit score above 800. Here is why this is true and how this can be improved.
Understanding CIBIL and Credit Scores
Many people are of the view that the credit score and the CIBIL score are similar to each other. However, the fact is that various credit bureaus provide scores to a person’s credit score. Companies like Equifax and Experian are authorized to deliver credit reports to the public. TransUnion CIBIL is also a leading agency in this aspect. Banks treat the CIBIL score as a norm as a result of which the term 'credit score' has become 'CIBIL'.
How Many People Have an 800+ Score?
The CIBIL score ranges from 300 to 900. If the score is above 800, it comes under the excellent category. However, only a handful of people, estimated to be around 10-20%, are able to reach so high. The rest lie within the range of 700-750 or 750-800. There are a number of reasons because of which the score may not reach 800, including payment records and use of credit. Moreover, a lack of a long credit history is quite common among most people.
Steps to Achieve an 800+ CIBIL Score
- Pay Credit Card Bills & EMIs: Pay your credit card dues, EMI payments, and loans on time. This contributes 30-35% to your credit score.
- Credit Utilization Ratio (CUR):It reflects how much of your available credit line is actually being used. Ideally, it should not exceed 30%. CUR contributes 25-30% towards your score.
- Credit History: Keep old bank accounts and credit cards. Do not close old accounts unnecessarily. Credit history accounts for about 15% of the credit score.
- Credit Mix: Maintain a mix of secured loans such as home loans, vehicle loans, and gold loans, along with unsecured loans such as credit cards and personal loans. An optimal mix will impact the score in terms of 10 to 15%.
- Limit Credit Inquiries:Applying for multiple loans in a short timeframe indicates financial distress to financial institutions. Always proceed with caution.
- Do Not Settle Loans: This will wipe off the debt but will further affect your Credit Score. This should be avoided if you are targeting a Credit Score of 800+.
- Check Your Credit Report: Inaccuracies within a credit report may negatively affect your credit scores. Ensure you regularly scan your reports to confirm loan principal amounts, payment dates, and current balances.
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