A crucial aspect of personal finance that can greatly impact your financial well-being is your credit score. Whether you are planning to secure a loan or apply for a credit card, your credit score plays a pivotal role in determining your creditworthiness. Credit scores may differ between the various credit bureaus like Experian, CRIF High Mark, TransUnion CIBIL, or Equifax, depending on the credit scoring models they use and how lenders report information. No matter which credit score you consult, when it comes to accessing credit and achieving your financial goals, a healthy credit score is paramount.
What is the Equifax credit score?
Before we dive into the importance, let us shed some light on what the Equifax credit score entails. In simple terms, it is a three-digit number that represents your creditworthiness. Ranging from 300 to 850, a higher Equifax Score signifies a lower credit risk. Financial institutions often use this score to assess your creditworthiness when you apply for loans, credit cards, or even rent a house. Outlined below are the Equifax Score ranges and what they generally mean for your credit status:
| Range | Status |
| 800-850 | Excellent |
| 740-799 | Very good |
| 670-739 | Good |
| 580-669 | Fair |
| 300-579 | Poor |
The most popular credit scoring model used in India is the CIBIL Score offered by TransUnion CIBIL, which ranges from 300 to 900, with a score of 750+ considered ideal by most creditors.
Why is the Equifax credit score important?
No matter that scoring model you refer to, having a good credit score opens doors to various financial opportunities. Whether you aspire to buy a dream home, get a car loan, or fund your education, a high credit score can make these aspirations a reality. On the flip side, a poor score can lead to rejection of credit applications or higher interest rates, making borrowing an expensive ordeal.
Factors influencing your Equifax credit score
Understanding the factors that impact your credit score is crucial in maintaining and improving it. Here are the key elements that most credit bureaus take into account when calculating your score:
- Payment history: Timely repayment of loans and credit card bills reflects positively on your creditworthiness.
- Credit utilisation ratio: This measures how much of your available credit you are using. Keeping this ratio low (below 30%) demonstrates responsible credit management.
- Credit mix: A healthy mix of different types of credit (e.g., credit cards, loans) can positively influence your score.
- Length of credit history: The longer your credit history, the more data there is to assess your creditworthiness.
- Credit enquiries: Multiple credit enquiries in a short period may indicate higher credit risk.
How to improve Equifax your credit score?
Boosting your credit score is entirely achievable with consistent financial discipline. Here are some practical steps to enhance your creditworthiness:
- Pay bills on time: Ensure you pay all your bills, including credit card bills and loan EMIs, by the due date.
- Reduce credit card balances: Aim to keep your credit card balances low and avoid maxing out your credit cards.
- Limit new credit applications: Frequent credit inquiries can adversely affect your score, so be mindful of new credit applications.
- Review your credit report: Regularly check your credit report for errors and rectify any inaccuracies promptly.
- Maintain a healthy credit mix: Having a mix of secured and unsecured credit can have a positive impact on your score.
Your credit score is more than just a number; it is a powerful instrument that can significantly influence your financial future. A good credit score opens doors to better credit opportunities and improved financial flexibility. When you are ready to take the next step towards building a strong credit profile, consider Bajaj Finserv Credit Pass. With a personalised dashboard for easy credit monitoring and monthly CIBIL Score checks, you will always be on top of your credit game. Sign up today and make the most of the limited-time offer of free, unlimited Credit Pass benefits for a full year!
