Credit score of 800: Easy ways to achieve excellent credit score and its benefits
15 October, 2024 | 18:06 IST
Achieving a credit score of 800 or higher is no small feat and it places you in an elite category of borrowers. Such a high credit score signals to lenders that you are an exceptionally reliable borrower, significantly enhancing your chances of securing favourable terms when applying for new credit instruments. You can qualify for the lowest interest rates, premium credit cards and a variety of other financial perks.
If you’re looking to improve your credit score, here are some essential steps to help you reach that coveted 800 milestone.
But first, let’s look into what a good credit score is.
According to a report published in August 2024 by TransUnion CIBIL, titled ‘Empowering Financial Freedom: The Rise of Credit Self-Monitoring in India’, credit scores in the country range from 300 to 900. These scores are classified into several tiers:
Subprime: 300 to 680
Near Prime: 681 to 730
Prime: 731 to 770
Prime Plus: 771 to 790
Super Prime: 791 to 900
Going by this classification, a score of 800 firmly places you in the Super Prime category, making you an attractive candidate for lenders.
Reaching a credit score of 800 or more opens the door to a multitude of financial benefits:
Higher approval rates: A high credit score increases your chances of being approved for credit cards or loans. Lenders view you as a lower-risk borrower, which makes them more inclined to extend credit to you.
Lower interest rates and higher credit limits: With an 800-plus credit score, you’ll often qualify for more favourable interest rates on mortgages, car loans and credit cards. For example, a lender may offer a borrower with a credit score of 800 an interest rate of 8.5% on a home loan while someone with a lower credit score may get rates of 8.8% or higher, significantly increasing the total interest paid over the life of the loan.
Better loan terms: If you have an exceptional credit score, lenders are likely to offer you better terms on car loans and mortgages, making it easier for you to fulfill your aspirations.
How to monitor your credit report and credit score
You can easily obtain a free credit score and a comprehensive credit report for free through digital platforms like the Moneycontrol app and website. This allows you to check your credit score instantly at no cost and monitor it regularly.
According to the report by TransUnion CIBIL about 44% individuals checked their scores at least four times within a year, and 46% of active individuals experienced an improvement in their scores. This shows the significant impact that regular monitoring can have on your credit score and overall financial well-being.
Getting to an 800 credit score may seem challenging, but it’s entirely achievable with consistent effort. Here’s how you can do it:
Pay your bills on time, every time: Payment history is the most crucial factor influencing your CIBIL score. Consistently paying your bills on time displays your reliability to lenders. While it’s possible to rectify missed payments and mitigate damage to your score, the best strategy is to avoid late payments altogether. Credit Institutions (CIs), or lenders, are currently required to provide credit information to credit information companies (CICs) once a month. However, starting January 1, 2025, banks and financial institutions will increase the frequency of updating credit records. On August 8, Reserve Bank of India (RBI) Governor Shaktikanta Das proposed that credit data be updated every fortnight, specifically on the 15th and the last day of each month, or at shorter intervals, agreed upon by the CIs and CICs. This means maintaining timely payments would become even more critical.
Keep your credit card balances low: Another significant factor in determining your credit score is your credit utilisation ratio, which compares your current credit card balances to your total credit limits. A credit utilisation rate of less than 30% is considered ideal. Keeping your balances low indicates responsible credit management and can positively impact your credit score.
Be mindful of your credit history: The length of your credit history also plays a vital role in your credit score. Generally, longer credit histories tend to yield higher scores. Credit scoring models evaluate the age of your oldest account, the newest account, and the average age of all accounts. Before closing a credit account in good standing, consider the potential consequences. Closing an account may shorten your credit history and decrease your overall credit limit, which could harm your score. Instead of closing a credit card, consider switching to one with no annual fee if you want to avoid fees.
Improve your credit mix: Diversifying your credit accounts can positively affect your score. If you primarily hold instalment loans (like personal loans or car loans), adding a credit card can improve your credit mix. A diverse credit profile shows your ability to manage different types of credit, which can improve your overall score.
Review your credit reports: Sometimes, a less-than-desirable credit score may not be your fault. Inaccuracies in your credit report could be harming your score. Regularly reviewing your credit reports can help you identify and dispute incorrect information. If you find discrepancies, contact the lender who reported the information or the credit bureaus to correct the errors.
Overall, while it may take some time to achieve a good credit score or break into the 800 credit score tier, the effort is worthwhile. Your credit score influences your ability to obtain credit and the terms that lenders offer, such as interest rates on mortgages.
A credit score of 800 and above reflects that you are an exceptional borrower. It can lead to better loan terms, as well as credit cards with better rewards and perks. As you work towards this goal, remember that it’s a long-term financial commitment and requires disciplined money management over years to achieve this milestone. For those looking to monitor their progress, don't forget to check your credit score instantly for free on the Moneycontrol app, ensuring you stay informed and proactive in managing your credit health.
Summary
Achieving an 800+ credit score puts you in the category of elite borrowers. It unlocks lower interest rates, higher credit limits, and better loan terms. Read this article to know how to achieve a credit score of 800 and above.
Disclaimer
This piece/article was written by an external partner and does not reflect the work of Moneycontrol's editorial team. It may include references to products and services offered by Moneycontrol.
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