How cost of borrowing is related to credit score?

If you want to qualify for the most competitive loan and credit card rates then you need a good credit score. What’s more, you need it to stay that way. 

• How lenders decide whether to lend to you?

Banks and credit card companies use a variety of different information to give you a credit score, which determines whether they will lend to you and at what interest rate.

Credit scoring works by awarding points based on the information:
You provide on your application form ,the lender may already have about you, based on previous accounts you have with them, and on your credit report, which is held by agency called CIBIL.
              

• You’ll also get a better credit score if you:

own your own home and/or have lived at the same address for at least a year ,have a good credit history by repaying other credit agreements on time, for example your credit card, auto loan, gold loan, personal loan , overdraft , Cash credit facility, Consumer loan  or Housing  loan.Have evidence of stability – for example you are employed rather than self-employed, you’ve lived at the same address, worked for the same company and had the same bank account for a long time are not connected financially, through your mortgage or joint bank account, to people with a bad credit score.

• How a poor credit score affects your ability to borrow .............

A poor credit score can mean you’re  rejected with any credit facility or loan or  charged higher interest rates, given a smaller credit limit.

A lenders or banks or NBFC doesn’t have to give you the interest rate they are advertising or that you see in best buy tables on comparison websites.  You may be offered an interest rate that’s higher – this is what’s called your personal APR. 

Source: Secondary