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A credit score of 680 is considered to be a fair one. Lenders consider individuals with this score as acceptable borrowers. Most lenders will be available and willing to lend. They offer various credit products for this score but not at the lowest interest rates.

How Is Your Credit Score of 680 Calculated

The credit score is calculated on a number of factors, especially on your payment history. Your repayment track record contributes to over 35% of weightage while computing the credit score. Let us now see the various factors that account for your credit score.
  • Payment History: Your payment history accounts for about 35% of your credit score. Neglected accounts, late, or missed payments can affect your credit score.
  • Public information: If bankruptcies or other public records which are negative appear on your credit report, they can have a damaging impact on your credit score.
  • Credit usage rate: Credit usage accounts for about 30% of your credit score. Total up the balances on your revolving credit accounts, such as credit cards and divide the result by your total credit limit. If you owe Rs. 50,000 on your credit cards and have a total credit limit of Rs. 100,000, your credit utilization rate is 50%. Experts recommend the CUR to be within 30%.
  • Length of credit history: The length of your credit history constitutes about 15% of your credit score. Those with longer credit histories will have a better credit score. New credit card users must make timely repayments and take good credit decisions to establish a lengthy and excellent credit history.
  • Total debt and credit: This makes up for about 10% of your credit score. The credit score constitutes the total amount of liability you have and the types of credit you use. There should be a credit mix in the types of credits that are used. It consists of loans with fixed payments such as personal loans and those with variable payments such as credit cards.

A credit scoring algorithm is then used by the bureaus to calculate your credit score. Your credit score not only helps lenders assess your loan eligibility but also helps them understand if you are worthy of credit. The higher your credit score, the higher are your chances to get your loan approved. So, it’s always advisable to check your credit score before you apply for a loan.

Disadvantages of A Low Credit Score

When you apply for a loan or credit card with a low credit score, the following will happen.

  • The application might be rejected: Each rejection will cause your credit score to drop further.
  • Higher interest rate: This can be an unnecessary financial burden and will also increase your chance of defaulting on payments.
  • Lower credit limit: With a low credit score, lenders will offer a very low credit limit.

How To Improve Your Credit Score of 680?

Although 680 is a fair credit score, you should work towards improving it to get loans at better interest rates. A credit score of 750 and above is an excellent credit score. You will be considered highly creditworthy and will get loans at the lowest interest rates. All lenders will be available, and you will get faster loan approval.

Let us now see multiple ways in which you can improve your credit score.

  • Get A Score Builder Credit Card: Get a score builder credit card using which you can pay the monthly bills regularly to improve your credit score.
  • Make Payments on Time: Your payment record is the most important factor in computing your credit score. It is very important to make sure that you make all payments on time and in full. Even a single missed or delayed payment can affect your score.
  • Do Not Exceed 50% of Your Credit Limit: For example, if your credit limit is Rs. 1 lakh, limit your monthly spending to less than Rs. 30,000. If you consistently exceed that limit, it reflects a lack of spending discipline and will negatively affect your score. Keeping within this limit will help increase your score.
  • Check Your Credit Score on A Regular Basis: You may think that you have a good credit score, but there might be other factors, like administrative errors, fraud, etc. that might be dragging down your score. For instance, you might have paid your loan in full but it might still be shown as outstanding due to a reporting mistake. Check your report and immediately notify the bureau of any mistakes or suspicious activity so that it is rectified right away. Eliminating these errors will help improve your score.
  • Maintain an Optimal Mix of Loans: Maintain a balance between secured (home/auto/gold) loans and unsecured (personal) loans. Having a higher proportion of secured loans has a positive effect on your credit score.
  • Avoid applying for multiple loans in a short time period: If your loan has been rejected once, be patient - Don’t apply immediately to multiple other banks. Each time your loan or credit card application is rejected, it affects your score negatively, so the more times your loan is rejected, the worse your score becomes. When lenders receive an application, they access your credit report through an ‘enquiry’. Too many enquiries without corresponding loan approvals lead to a drop in your score. It is advisable to first improve your score and your creditworthiness before applying again for a loan.

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