686 CIBIL Score: Is it good or bad?
A 686 CIBIL score is categorised as "fair" on the creditworthiness scale. While it indicates that you are a moderate credit risk, it is below the "good" score range of 700-749. This score allows access to credit, but lenders may offer less favourable terms. You might face higher interest rates or limited credit limits compared to individuals with excellent scores. Improving your score can unlock better opportunities, such as lower interest rates and enhanced financial flexibility. Timely payments, low credit utilisation, and a diverse credit mix can positively influence your score and increase your financial reliability.
How to improve your 686 CIBIL Score
- Pay bills on time: Consistent and timely payments significantly boost credit scores.
- Reduce credit utilisation: Aim to use less than 30% of your available credit limit.
- Avoid multiple credit applications: Too many hard inquiries can negatively impact your score.
- Check your credit report regularly: Identify and dispute any errors that might lower your score.
- Diversify your credit mix: A healthy balance of secured and unsecured loans can be beneficial.
- Keep old accounts active: A longer credit history helps improve your score over time.
How does a 686 CIBIL Score impact interest rates?
A 686 CIBIL score can result in higher interest rates compared to borrowers with excellent scores. Lenders perceive you as a moderate risk, leading to stricter loan terms or additional requirements, such as co-signers or higher collateral. Personal loans, credit cards, and mortgages may come with interest rates slightly above market averages. For instance, a loan seeker with a 686 score might receive a 10% interest rate, whereas someone with a 750 score might secure 8%. Proactively working to improve your score could help you qualify for better interest rates and reduce your overall borrowing costs.
Conclusion
A 686 CIBIL score is a fair starting point for accessing credit but offers room for improvement. While it may allow you to secure loans, the associated higher interest rates and stricter terms can impact your financial flexibility. By focusing on timely payments, reducing credit utilisation, and maintaining a healthy credit mix, you can steadily improve your score and unlock better financial opportunities. Regularly monitoring your credit report ensures accuracy and prevents errors from affecting your score. Taking proactive steps to enhance your creditworthiness not only saves money on interest rates but also strengthens your overall financial stability.
