CIBIL Score Rules – In India, credit scores range from 300 to 900, with higher scores indicating better creditworthiness. A credit score of 720 is considered good and reflects responsible financial behavior. While it is not in the excellent range (above 750), it still allows borrowers to access various financial opportunities, such as loans with better interest rates and eligibility for premium credit cards.
Lenders view a 720 credit score as a positive indicator of financial stability. It signals that the borrower has a strong repayment history, regularly pays EMIs on time, and maintains a healthy credit utilization ratio. This makes it easier to secure loans with favorable terms and reduces the risk of loan rejection.
Key Benefits of a 720 Credit Score
A credit score of 720 can offer multiple financial advantages. Here are some of the most important benefits:
Lower Interest Rates on Loans
One of the biggest benefits of having a 720 credit score is access to lower interest rates on personal loans, home loans, and auto loans. Lenders consider individuals with good credit scores as low-risk borrowers, making them eligible for loans with better terms and lower interest rates. Over time, this can result in significant savings on interest payments.
Eligibility for Premium Credit Cards
With a credit score of 720, individuals can qualify for premium credit cards that offer exclusive perks such as higher rewards, cashback, travel benefits, and concierge services. These credit cards also come with higher credit limits, allowing for better financial flexibility.
Higher Approval Rates for Loans
According to reports, around 79% of loans are approved for borrowers with credit scores above 750. While a score of 720 is slightly below this range, it still significantly improves loan approval chances compared to those with lower scores, such as 650 or 500. Borrowers with a 720 score are more likely to get approved for personal loans, business loans, and even home loans with minimal documentation.
Lower Insurance Premiums
Many insurance providers consider credit scores when determining premiums for policies such as health and auto insurance. A credit score of 720 can lead to lower insurance costs, providing additional financial relief over time.
Faster Loan Processing and Approval
A good credit score speeds up the loan approval process. Since banks and financial institutions consider borrowers with good credit scores as low-risk, they are more likely to approve loans quickly. This can be especially useful during financial emergencies, such as medical expenses or urgent home repairs.
How to Maintain a Good Credit Score
Achieving a credit score of 720 is a great milestone, but maintaining it requires financial discipline. Here are some key tips to keep your credit score stable or even improve it further:
1. Pay Bills and EMIs on Time
Timely payments are one of the biggest factors affecting credit scores. Missing payments or making late payments can negatively impact your score. Always ensure that EMIs, credit card bills, and other financial obligations are paid on time.
2. Keep Your Credit Utilization Low
Credit utilization refers to the amount of credit used compared to the total available credit limit. Experts recommend keeping your credit utilization ratio below 30 percent. For example, if your credit card limit is one lakh rupees, try not to use more than thirty thousand rupees at any given time.
3. Check Your Credit Report Regularly
Mistakes in credit reports can lower your score. Reviewing your credit report periodically can help you spot errors and dispute them with credit bureaus. This ensures that your score accurately reflects your financial history.
4. Avoid Multiple Loan Applications
Applying for multiple loans in a short period can negatively impact your credit score. Each loan application triggers a hard inquiry, which can reduce your score temporarily. It is better to space out loan applications and apply only when necessary.
5. Maintain a Good Mix of Credit
Having a mix of credit types, such as secured loans (home or auto loans) and unsecured loans (personal loans or credit cards), can positively impact your credit score. Lenders prefer borrowers who can manage different types of credit responsibly.
Future Trends in Credit Scoring
Credit scoring methods are constantly evolving to provide a more accurate picture of a borrower’s financial health. The Reserve Bank of India (RBI) has announced new regulations that require bi-monthly updates to credit reports starting in January 2025. This will ensure more timely and precise assessments of creditworthiness, allowing borrowers to better plan their finances.
With these new updates, lenders will have access to more real-time data, which can lead to quicker loan approvals and better financial decision-making. Borrowers will also have the opportunity to monitor their credit status more frequently, helping them improve their credit behavior over time.
A credit score of 720 is considered good in India and provides access to multiple financial benefits, such as lower interest rates, faster loan approvals, and eligibility for premium credit cards. However, maintaining a good credit score requires financial discipline, including timely payments, responsible credit usage, and regular credit report monitoring.
As credit scoring systems evolve, borrowers should stay informed about changes in regulations and financial best practices. By managing credit wisely, individuals can continue improving their financial stability and securing better financial opportunities in the future.
