Understanding your credit report is complex.

A credit score is a 3-digit number which reflects your credit behaviour. Consider it as marks awarded to you by various financial institutions for your financial conduct. High credit score and your good performance are positively related and is an indicator of your good financial management skills making you eligible for all kinds of loans and would also enable you to bargain for interest rates with your bank. On the other hand, a low credit score is a sign of you not managing your financials well and raises doubt on your credit worthiness.

So, long story cut short, the higher your credit score, the higher your credit worthiness and a bad score makes you a bad incentive for financial institutions.

How to calculate your credit score for free on Mymoneykarma?

Just follow these simple steps listed below:

• Visit our website
• Click the credit score option in the menu bar.
• Enter your name and email id.
• You will be allotted a group and entered in our waitlist
• Spread the word about My Money Karma and we will move you to a higher spot

Credit score is calculated by Credit Information Companies. In India, there are 4 companies that perform this job: CIBIL TransUnion, Experian, Equifax and High Mark. Now let’s try to understand how these companies actually calculate the credit score.

When you make a transaction-the ones that are relevant to calculate your credit score-banks forward the details of it to all four credit agencies. It is a compulsion made by regulators for banks to share information will credit agencies. Essentially, banks keep Credit Information Companies up-to-date about your monetary habits. Whenever a bank needs to check your Credit Score, they can reach out to any one of the bureaus. It doesn’t matter which one they approach because all four are at equally par with each other and would reflect nearly the same result for you.

After receiving information from the bank, credit bureaus get down to the task of collecting more information about your financial habits from other banks and financial institutions. The credit bureaus then process this information to formulate what is called a Credit Report.

So now you must be wondering what this credit report is.

It is nothing but your financial report card Remember one you used to get in school? More like that only that it contains your Credit Score. It’s wiser to check your score from time to time, preferably on a yearly basis.

It is important to keep an eye on your credit score because it’s the best way to gauge your luck to get a line of credit.

Another reason to check your credit score is to determine why it dips and also to crosscheck whether the credit agencies committed any error while commuting it. This would help you to make timely amends.

The methodology adopted by these agencies to calculate your credit score might differ but they all reflect the same result, so no matter which agency commutes, your credit score calculated by all will be the same. This is more so because banks intimate relevant information to all the four agencies without any bias, so whichever agency your bank hires to calculate your credit score there won’t be any major discrepancy.

Of the 4 credit agencies, CIBIL, however, is the most popular one because it is one of the first credit rating agencies to start its operation in India. And hence some people go with the saying that old is gold and hence prefer CIBIL. However, this notion is not true because banks give weightage to scores of all the four agencies. So, if your score is evaluated by any agency other than CIBIL you need not worry.

As per the popular belief, it is not true.

All the credit information companies function as autonomous units which are responsible for preparation of an individual’s credit report and provide that information to various concerned banks. Secondly, CIBIL and the other credit agencies do not entertain requests from individuals to make changes to financial details in Credit Reports. Changes are incorporated when banks provide relevant information to these agencies. This ensures that the information used in your credit report is 100% authentic. Mainly because credit score becomes one of the most important factor which banks put into consideration while reviewing an individual’s loan or credit card application. Also, it affects the interest rate which you end up paying to banks.

So, make it a point to score high on this report card.

We at mymoneykarma have the mission to help you take charge of your financial future. As a first step to that we want to empower you with the free credit score that will help you access credit whenever you need it.

If you have a good credit score, then you can be confident that your loan application will be approved without any hassle. You also tend to be in a good position to bargain your interest rate with your lender bank and also ask for some additional benefits. On the contrary, seeking a loan will low credit score further lowers your credit score, let alone getting approval for a credit line. Hence, check your Credit Score before you apply for a financial product.

So, it you have a poor credit score, it would be wise to manage your finances better by paying your dues on time for a good few months and reap fruits in form of good credit score awarded by the credit agencies.

Therefore, we want to help you monitor your Credit Score regularly and have a good credit score.

Your credit score can be any number between 0-900 points. You can use the following points as a guideline to know what your score means:

• Below 300: You are too risky for any banker or lender. You do not have sufficient history to allow banks to judge your credibility
• 300-449: This range tends to be the poor score one. If an individual finds him/herself in this category, then he/she cannot afford to miss any payment on their ongoing credit card bills or loan installment.
• 600-749: This is the median range. In this category some banks accept the loan requests and some don’t.
• 750-900: Being in this category gives you an edge over others as banks prefer clients in this category and they themselves make efforts to offer loans and, credit cards at attractive rates.

The following factors will be considered in the calculation of your credit score:

• Credit history

  This factor plays a crucial role in determining an individual’s credit score. It takes into account all the past payments of credit cards and loan installments, it checks to see whether they were paid on time, in advance or paid late and also if an individual defaulted and failed to make any of his/her payments. To use this factor as an advantage for scoring good credit score all the payments should be made within the time limit.

• Type of credit

  This is another important factor that affects credit score. All the 4 credit agencies take into consideration the type of loan (secured or unsecured) which are taken in the past and how old the credit history is. Those with high credit score usually have a mix of secured and unsecured loans instead of only relying on a single type of debt like a personal loan or credit cards. Mixing a credit card (unsecured debt) for instance along with a property loan (secured debt) may be better than simply relying on a credit card to maintain a high score.

• Credit Exposure

  This also contributes to how high or low your credit score is. If you have some debt such as a credit card that you use, it skews the score to the higher side while having no debt at all may work against you. In addition, individuals who have a lower debt to credit ratio (<40%) tend to have a higher credit score as it acts as proof of their ability to take on additional debt and repay it in the future.

• Other Factors:

  There are some other factors which are also responsible for a good (high) or bad (low) credit score. The remaining of the total credit score is based on these factors. Applicants who have successfully handled credit such as loans and credit cards longer tend to have higher credit scores. On the other hand, individuals who have been denied multiple times for new credit tend to have a lower credit score as these lender checks show up on your credit report.

The term credit score, credit rating, and credit reports are confused with the meaning of the other term. However, the following list should help you in understanding each of the terms:

A credit score is a three-digit numerical representation of your financial credibility that can vary from a score of 300 to 900 while the credit rating is referred to the scores that are assigned to businesses and companies. The credit reports contain a detailed overview of your credit history based on your past credit and loan details.

A credit score or credit rating can change on a monthly basis based on the information provided by banks and non-banking financial companies (NFCs), if there are any changes, however, the information stored on your credit report stays for many years.

Credit score is numerical while the credit ratings are indicated in ratings such as A, A+, etc.

• Your cibil score or credit score must range between 300 and 900
• 90 % of loans were approved for individuals with score greater than 750
• Higher the credit score, Likely are the chances to get your loan approved

• Increased credit card limits
• Better loan rates
• Better credit card deals

• Making less than the minimum payment
• Applying for too many things at once
• Not keeping tabs on your card balance
• Not maximizing your credit limit
• Having credit limits that are too low