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Understand your Credit Score

Credit Score is a 3-digit number that represents your creditworthiness.

Indicates how likely you are to repay loans on time.

Calculated using credit history, outstanding debts, repayment record, and credit utilization.

Lenders check your Credit Score before approving loans or credit cards.

Improve Your Credit Score

There is no rocket science; improving your credit score is easy & requires you to have some good financial habits! Here's how you do it:

Avoid multiple loan applications

Several rejected loan applications can have an adverse effect on your credit score; thus, if you want to raise your credit score, you should refrain from doing so.

Do not exhaust your credit card limit

Doing a credit score check and being aware of its limitations is essential. Maintaining your credit utilisation below 30% of your available credit limit is advised.

Pay your credit card bills & EMIs on time

It's a good idea to schedule your repayments using the EMI calculator. Using an EMI calculator, you can plan your EMI and prevent default or delay. Your credit score will rise if you make your repayments on schedule.

Borrow what you can repay

You should weigh all the aspects while deciding on the loan amount. If you owe a significant amount relative to your total credit limit or income, it can lower your score because it may indicate a higher risk of default.

Maintain a balanced Credit Mix

Having a mix of credit types shows lenders your ability to responsibly handle different kinds of debt. So, one should have a balanced mix of credit—combining secured and unsecured loans impacts your credit score positively.

Think before becoming a Guarantor

Being a guarantor carries some risk because your credit score will suffer if the primary borrower defaults. Accepting such arrangements should only be done if you are confident in the borrower's ability to repay and their financial stability.

Credit Score Range

300 - 579

(Poor)

High risk; fewer loan approvals; improve by clearing dues

580 - 669

(Fair)

Indicates delays in payments; pay on time & reduce utilization.

670 - 739

(Good)

Eligible for standard rates; maintain low credit card usage.

740 - 799

(Very Good)

Reflects strong financial discipline; better loan terms.

800 - 900

(Excellent)

Top-tier benefits, best rates and high approval chances.

How is the Credit Score Calculated?

Credit bureaus (CIBIL™, Experian, Equifax, CRIF) use unique algorithms, but common factors include:

Payment History

Timely bill & EMI payments reflect reliability; delays lower score

Credit utilisation ratio

Use below 30-40% of your credit limit for a healthy score

Credit Mix

Maintain a balance of secured (home loan) & unsecured (personal loan) credit.

Hard Inquiries

Frequent credit applications can reduce your score; apply selectively.

Benefits of a High Credit Score

Quick Loan Approvals

Increases approval chances and loan limits.

Creditworthiness

Builds trust and improves borrowing opportunities.

Attractive Interest Rates

Access to better rates and offers.

Negotiating Power

Helps secure favorable loan terms and higher limits.

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Frequently Asked Questions (FAQs)

Frequently Asked Questions

A credit report includes detailed information about your credit history, such as loans, credit cards, payment history, account status, and more. The score, on the other hand, is a three-digit number, typically ranging from 300 to 900, that reflects the creditworthiness based on the information in the report.

No, checking your own credit score is considered a soft inquiry that does not impact your credit score. Your credit score will decrease only if you are behind on your due payments and several hard inquiries have been made and informed to the credit bureaus.

Not necessarily. Every credit bureau uses a distinct scoring methodology, and may have access to slightly different data, resulting in variations in your score. However, scores across bureaus usually follow a similar trend. A score closer to 900 generally indicates higher creditworthiness.

Whenever new information is added or removed from your credit report, your credit score is bound to change. This includes opening or closing loan accounts, changes in credit card utilization, or missed payments. Generally, banks and financial institutions inform about your repayment & enquiries made to credit bureaus once a month.

Generally speaking, the most significant factor in achieving a high credit score is timely bill payment. Being late on any loan repayment for an extended period is seen adversely by lenders as a potential sign of future default on payment. Avoiding late payments is the best strategy to achieve a high credit score.

Understand your Credit Score