600 Credit Score: Is It Good or Bad?

A credit score is an indicator of someone’s creditworthiness generated by an authorized and government-licensed institution. Financial institutions (FI) and non-financial institutions (NFI) mostly use the score before approving loan applications.

When the credit score is issued, it will usually become one of the main factors of FI or Non-FI to decide whether or not your loan application is approved and how much loan, rate, and tenure you will get.

Credit scores usually consist of numbers and alphabetical codes that describe the Debtor’s risk profile. The score is generated from multiple sources, such as loan and payment history, salary slips, income records, and daily transactions.

For those who are not quite familiar with it, financial institutions (FI) consist of banks, multi-finance companies, insurance providers, while non-financial institutions (NFI) refer to entities such as pawnshops, telco providers, e-commerce platforms, and others.

Currently, most financial institutions in Indonesia still assess someone’s credit scores using the Financial Services Information System (SLIK) provided by the Financial Services Authority (OJK). However, as the rise of digital payment shows high growth over time, digital transactions also occur, making alternative data ownership important. Some alternative data are e-commerce transactions, telecommunications, digital service subscriptions, and electricity bills.

According to a report this year by Tech In Asia, today’s digital transactions from online shopping reach up to 59% of internet users’ activity. This highlights the need to expand the assessments, as the displayed data may not reflect the borrowers’ financial capabilities. FI and NFI need more comprehensive tools to evaluate their potential borrowers and maximize their assessments.

To help their clients reach new markets, PT CRIF Lembaga Informasi Keuangan (CLIK) utilizes broader and more diverse access to data, enabling them to provide a more comprehensive overview of individuals’ financial conditions. CLIK’s tools can accurately describe financial situations by collecting information from various sources, such as e-commerce transactions, telco, digital service subscriptions, and electricity bills. With richer data, financial institutions can gain a deeper understanding of potential borrowers’ finances from their previous transaction histories and potential future financial behaviors.

Generally, private credit bureaus measure people’s creditworthiness scales in different ranges. President Director PT CRIF Lembaga Informasi Keuangan (CLIK) Leonardo Lapalorcia explains that to determine a prospective borrower’s credit score, CLIK divides the credit score ranges into numbers and letters as indicators of the borrower’s risk level.

Here’s the detail: 

1. Scores between 151 and 319 or A-B are categorized as very high risk, while scores between 320 and 519 or C-D are categorized as high risk. Suppose a prospective borrower’s credit score is included in these categories. In that case, there is a high possibility your loan application will be rejected or that financial institutions will offer you higher rates. Therefore, prospective borrowers should consider postponing their new applications or settling the previous debt.
2. Scores between 520 and 545 or E are categorized as medium risk, and 546-578 or F-G-H are medium-low risk. Borrowers who have a history of on-time payments usually fall into these categories. Under these conditions, applying for a new loan allows securing lower rates and higher loan amounts.
3. Scores between 579-596 are categorized as I or low-risk, and scores above 596, or J, fall into the very low-risk category. Borrowers with such scores will have a big opportunity, like getting priority to bigger loan amounts with the best rates from financial institutions.

Credit Score 600: What is It and How to Achieve It

Currently, an individual with a credit score of 600 is considered as a very low-risk category. It means financial institutions have put prospective borrowers in that category as having a low probability of default. However, these individuals in this category represent only a smaller population in Indonesia, especially when the assessment only applies to primary financial data such as bank accounts, credit cards, or insurance premiums.

Generating alternative data offered by private credit bureaus such as CLIK—which utilize data from e-commerce purchases, mobile top-ups, digital service subscriptions, and electricity bills—able to provide additional references to someone’s credit score report and possible to alternate to a better category, for example from high risk to medium risk or medium risk to low risk.

Suppose you are a prospective borrower with high risk and aim to achieve a 600 credit score. In that case, you should try these steps: effectively managing the credit utilization ratio, ensuring timely debt payments, and maintaining a longer credit history by choosing longer payment terms if possible.

Read also: Loan Application Rejected? Check Out These Tips to Get Approved!

Once done, you can recheck your credit score using the Financial Services Information System (SLIK) from the Financial Services Authority (OJK) or reliable private credit bureau services such as CLIK before applying for a new loan.