What is a credit score? Why do students studying abroad need to be mindful of it?
A credit score is a numerical rating that reflects an individual's creditworthiness, based on their credit history. It ranges from 300 to 900, with higher scores indicating better credit reliability.
Maintaining a good credit score is crucial for students studying abroad, especially those relying on education loans. It influences the terms and interest rates they receive from lenders. A strong score can lead to better loan options, lower interest rates, and favourable repayment terms, ultimately reducing the overall cost of the loan.
Additionally, building a good credit score while studying abroad can benefit students in the long run, helping them secure credit cards, accommodation, and even jobs that require financial stability verification.
How does taking an education loan affect Credit Score?
The main impact of taking an education loan on your credit score is that it helps establish your credit history. This is especially important if you had no previous loans or similar financial obligations before taking the education loan.
Apart from that, an education loan can be an effective way to positively build your credit score, as there are usually small interest payments during the moratorium period or sometimes even a free moratorium.
Once you graduate, secure a job, and start repaying the loan, it can further enhance your credit score, making it easier for you to obtain future loans and other services abroad.
Missing payments or defaulting on your loan can have a detrimental effect, lowering your score. Late payments are reported to credit bureaus and can significantly harm your creditworthiness, making it difficult to secure future loans or credit cards.
What is CIBIL? Why do students studying abroad need to be mindful of it?
CIBIL (Credit Information Bureau India Limited) is India's leading credit information company that maintains records of individuals' and businesses' credit activity, including loans and credit cards. It assigns a CIBIL score, a three-digit number ranging from 300 to 900, reflecting a person’s creditworthiness.
For students studying abroad, a good CIBIL score is crucial, especially if they plan to take an education loan. Lenders review this score before considering a student as a possible applicant, approving loans, and setting interest rates.
A high CIBIL score increases the likelihood of getting approved for a loan with favourable terms, while a low score may lead to higher interest rates or rejection in a few cases. Therefore, students should monitor and maintain a good CIBIL score for financial ease and security.