Are you creditworthy?

Everyone who has ever been through a security check knows the vigilance of a metal detector! Keys, mobile phones or even that odd aluminum foil you forgot to throw away sets off a screening process. Screening is the most employed strategy in the world to assess risks and complications. Much like airports screen for safety and health risks, banks and credit card companies have to ‘screen’ individuals before deciding to take a risk on them, when lending credit.

Banks rely on a metric-driven system to screen and assess individuals seeking credit. So if you are looking for a loan or a credit card, banks will employ the metric-detector called Credit Scores to understand your creditworthiness. This score is arrived at by analyzing your credit and repayment track record. In essence, if you’ve been prompt at paying your EMIs and credit card bills, you are likely to have a higher score. Since a high score is reflective of a person’s creditworthiness, lenders are willing to bet on those individuals.

Do you REALLY need a good credit score?

If you are wondering why you should be worried about credit score, we’ll tell you this. It is the most important score you’ll be measured against in your financial life! From obtaining loans and credit cards to getting better interest rates, credit scores have far-reaching consequences. In advanced economies, the credit scoring system is used as a way to screen people for employment, leasing and marital opportunities even! Although not common in India yet, the trend is picking up. Recently, some major companies in the country have made it mandatory for prospective candidates to submit credit score documents – this will impact the way recruitment is done in India.

If you are not in the credit system yet, the best way is to get a credit card, and use it responsibly. If you have taken and repaid a loan or own a credit card, Credit Information Bureau of India Limited (CIBIL) has a track of your credit history. Find out where you stand by visiting the website www.CIBIL.com to know your credit score.