In India, credit rating bureaus generally provide credit scores ranging from 300 to 900. A credit score of 720 is typically considered a strong indicator of an individual’s financial health.
It reflects responsible financial management and credit behaviour while also opening doors to various financial opportunities, such as easier loan approvals, fair repayment terms, and lower interest rates.
This write-up explores five key insights to consider regarding a credit score of 720.
The concept of the credit score spectrum
A credit score above 750 is generally ‘fairly good’, while a score of 720 falls within the ‘good’ category. It indicates that the borrower has a strong repayment history, consistently pays loan EMIs on time, and maintains low credit utilisation rates.
In India, where credit scores typically range from 300 to 900, a score of 720 signals lenders that you are a low-risk borrower. This indicates a high likelihood of repaying borrowed funds as per the terms of a personal loan contract. As a result, securing loans and credit products with favourable terms makes future transactions easier.
What are the benefits of a 720 credit score?
- Lower interest rates: Individuals with a credit score of 720 are more likely to qualify for personal loans at lower interest rates than others. This can lead to significant savings over the loan repayment period, making it an attractive option for home and auto loans.
- Eligibility for premium credit cards: A credit score of 720 often makes individuals eligible for premium credit cards and exclusive offers. These cards provide better rewards, additional perks, higher credit limits, and flexible repayment options. They may also include benefits such as travel privileges and concierge services.
- Higher approval rates: According to publicly available records from CIBIL TransUnion, 79% of loans are approved for customers with credit scores above 750. While a score of 720 falls slightly below this threshold, it still significantly improves your chances of personal loan approval compared to individuals with lower scores, such as 650 or 500.
- Lower insurance costs: Insurers often factor in credit scores when determining premiums. A higher credit score can result in lower insurance premiums and associated costs, offering valuable financial relief and improving overall financial health.
- Faster loan processing: A credit score of 720 can encourage lenders to be more lenient and expedite the approval process. Since borrowers with good credit scores are considered low-risk, this often leads to quicker loan approvals and disbursements, reducing loan processing time and related hurdles. This can be especially beneficial during emergencies such as medical treatments, surgeries, or unexpected expenses like home construction and renovations.
How to manage your credit score properly?
Achieving a high credit score is one thing, but maintaining it requires consistent financial discipline. To manage your credit score, it is important to manage your overall credit profile responsibly.
This includes making time-bound payments, keeping your credit utilisation ratio below 30 per cent and regularly going through your credit report for errors.
For example, if your credit card issuer has granted you a credit limit of ₹1,00,000, ensure that you do not use more than ₹30,000 at any given time. Keeping your credit utilisation below 30 per cent helps maintain a strong credit score and demonstrates responsible credit management.
What are the future trends in credit scoring?
With the Reserve Bank of India’s new regulations mandating bi-monthly credit report updates starting January 2025, borrowers can expect more accurate and timely assessments of their creditworthiness, enabling better financial planning and lending decisions.
This development aims to empower consumers and enhance lender confidence in assessing risk. A credit score of 720 remains advantageous for Indian borrowers, improving access to better financial products and favourable terms.
Disclaimer: Mint has a tie-up with fintechs for providing credit; you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit scores. Mint does not promote or encourage taking credit as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.
