What impacts your credit score and how?

In order to maintain your financial health, you should be mindful about your credit health.

Here are a few things which positively affect your credit score

  • On time loan EMI payments in case of loans.
  • On time credit card bill payment and in full rather than paying minimum due.
  • Longer and stable credit history.
  • Proper utilization of approved credit limit
  • A good mix of credit : if you are taking only one type of credit consistently rather than a mix of different types of loans viz. secured and unsecured, and personal loans, credit card usage, car loans etc.
  • Maintaining strong finances (example : a healthy income to debt ratio).
  • Regularly checking your credit reports are correct and error-free and ensuring financial institutions that you deal with submit your data to credit bureaus.

Here are a few things which negatively affect your credit score

  • Irregular or late loan repayments.
  • Defaulting, being late or regularly paying part of credit card bills.
  • Cheque bounces.
  • High utilization of approved credit limit or overshooting the limit.
  • Multiple credit report enquiries by banks and other institutions.
  • Multiple unsecured personal loans applications and/or rejections.
  • Defaulting as a guarantor.
  • Errors in records by banks and finance institutions.

Always ensure you have good credit health. You never know when you will need to borrow money, for emergency or otherwise!

What is a credit score?

What is a credit score?

A credit score is a number assigned to you based on a study of your credit history which includes your loan history and their payment patterns, credit card usage and payment history, bank accounts held and closed, credit inquiries made by you etc.

Where can I get my credit score in India?

The Reserve Bank of India has licensed 4 credit bureaus to give out credit scores in India. They are Experian, Equifax, Highmark and the most popular and oldest one CIBIL. You can apply for a CIBIL score here.

What is a good credit score in India?

The most popular credit score in India is from CIBIL. It ranges between 300 to 900, with 900 being the best score. The meter below shows you approximately how many percent of total loan applications end up getting approved for different CIBIL scores. 79% of loans approved have a CIBIL score of more than 750.


CIBIL score range

0 or -1: If you have no credit history created via a credit card or loans, your score will be 0. You should take one so that you can build a credit history over time.
350 – 550: This is a bad score. You will be in this range if you have regularly defaulted on payments and your chances of getting new credit is very low.
550 – 650: If you are fairly regular with your payments, this is where your score would lie. Financial institutions would consider trusting you with new loans and cards.
650 – 750: You are in a safe zone. You will get a loan with a good chance and if you stick to your current payment habits, you could reach the best CIBIL scores.
750 – 900: This is the best range to be in. You are particular about your payments are have a really good payment history. Banks will offer you credit products with attractive interest rates.

Why is having a good credit score important?

  • Most financial institutions look at your credit score before deciding to give you a loan or a credit card.
  • Sometimes banks can also look at your credit report when you want to open an account with them.
  • Credit scores can also be asked by landlords, utility companies and a variety of service industries where you will be required to pay regularly for some service you are availing.
  • Employers can look at your credit history as part of your background verification before offering a job contract.
  • Ultimately having a good credit score can give you access to credit at cheaper interest rates.