The NRI’s guide to credit scores in India

As a Non-Resident Indian (NRI) navigating the financial landscape in India, understanding credit scores is crucial. Your credit score plays a pivotal role in determining your creditworthiness and can impact your ability to secure loans, credit cards, and other financial products. In this comprehensive guide, we’ll dive deep into the world of credit scores in India, exploring how they are calculated, why they matter, and the steps you can take as an NRI to maintain a healthy credit profile.

What is a credit score? A credit score is a three-digit number that rates your creditworthiness. It is based on your credit history, including information like the number accounts, total debt, EMIs, repayment history, etc. In India, the credit score ranges from 300 to 900. In the United States, it ranges from 300 to 850. The higher your score, the better your credit health.

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What is the difference between credit score and CIBIL score?

A credit score is a generic term that measures the creditworthiness of an individual or business. TransUnion CIBIL generates credit score, which is called as CIBIL score. As it is the oldest bureau that generates the credit score, it is the most popular credit bureau.

How does my credit score get generated?

In India, a credit score is issued by credit bureaus like TransUnion CIBIL, Equifax, HighMark™ and Experian India.

These credit bureaus generate and maintain credit information reports on individuals based on information from banks and financial institutions and then generate their credit scores. For instance, TransUnion CIBIL generates a CIBIL using a scoring algorithm that takes into account these data points, macro-level credit trends, and other information.

Why do I need a credit score?

• Access to credit: Lenders use credit scores to evaluate your creditworthiness and make decisions on loan amounts and approvals. A higher score increases your chances of getting credit and a higher amount of credit.
• Loan terms and conditions: A good credit score will help you get credit at more favourable terms, such as lower interest rates.
• Rentals: Landlords and property management companies may review your credit score when you apply to rent an apartment or house.
• Employment Opportunities: Some employers may check the CIBIL score or any of the other credit scores as part of their background checks, especially for positions involving financial responsibilities, senior leadership, etc.

Guide – NRI Personal Loan

Is it possible for an NRI to have a credit score?

NRIs can have a credit score. They can visit the official websites of any credit bureaus and request their credit score and report. For instance, individuals can get one free CIBIL report and one CIBIL score per year. You can purchase an access plan from CIBIL’s website if you need to monitor your credit history regularly. Click here to know more. You will need access to an Indian mobile number to generate the CIBIL score and get the report.

Even if you’re not planning to take out a loan in the near future, I strongly recommend checking your credit score. One of our clients, a Singapore-based NRI, had never taken a loan. After returning to India and earning an eight-figure salary, he decided to buy a small apartment, but his loan application was denied. Before moving to Singapore, he had a credit card and missed a small payment, which accumulated penalties and severely impacted his credit score. This situation could have been avoided by simply checking his score. So, it’s always a good idea to stay informed about your credit status.

Why should an NRI have a credit score?

Usually, Non-Resident Indians (NRIs) maintain strong financial ties to India. Many NRIs want to do business in India, expand their business here. Others may wish to return to India for work or profession. In this case, the credit score is a valuable financial asset. A good score will ensure that you can continue to easily access credit and financial opportunities such as loans, credit cards, and housing India.

Considering evolving business conditions across the world and the interconnectedness of the global financial systems, is important to have a strong financial foundation in India, irrespective of whether you plan to return to India or not. A good credit history is a key factor that will help keep financial options open in India and abroad.

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How can NRIs maintain a good credit score?

NRIs can follow these steps to establish and manage their credit scores while living abroad.

• Maintain 1-2 credit cards and use them so that they remain active and you have a continuous credit history.
• Aim to keep credit utilization below 30%, as consistent high utilization can lower the credit score.

Credit utilization = Credit card balance /  Credit limit

• Ensure timely payments on credit cards and loan EMIs, as late payments and missed payments can impact the credit score
• Pay utility bills, if any, on time.
• Avoid making too many enquiries for loans, credit cards, etc., as it may indicate financial distress and lower the score.
• Review your credit score regularly. If you find errors or discrepancies, raise them with the credit bureau.
• Exercise caution when you choose to be a guarantor for another party’s loan. If the party defaults payment, your credit score can be harmed.

As an NRI, you can keep your financial options open in India with a good credit score. Learning what your credit score is and what goes into calculating your credit score can help you take steps to improve it and have better access to credit and financial opportunities.

I hope this guide has given you a clear understanding of credit scores in India. If you’ve taken any type of loan in India, we’d love to hear about your experience. Please share your thoughts in the comments section below!