Credit Score

    Understand and improve your credit score to unlock better financial opportunities

    What is Credit Score?

    A credit score is a 3-digit number (300-900) that represents your creditworthiness. Higher scores indicate better credit health and help you get loans at lower interest rates.

    Why It Matters

    Lenders use your credit score to determine loan eligibility and interest rates. A good score (750+) can save you lakhs in interest over time.

    How to Improve

    Pay bills on time, keep credit utilization low, maintain a healthy credit mix, and avoid too many credit inquiries.

    Credit Score Ranges

    Understanding where you stand

    750 - 900 (Excellent)

    Best interest rates, easy loan approval

    700 - 749 (Good)

    Good rates, likely approval

    650 - 699 (Fair)

    Moderate rates, may need co-signer

    300 - 649 (Poor)

    High rates, difficult approval

    How is credit score calculated?

    A credit score is calculated by credit bureaus using your past and current credit behaviour. It reflects how responsibly you manage borrowed money over time. While the exact calculation method is proprietary and differs slightly across bureaus, all credit scores are based on a common set of factors related to repayment history, credit usage, and borrowing patterns.

    Payment History

    The most important factor in calculating a credit score is your payment history. This includes whether you pay your loan EMIs and credit card bills on time. Late payments, missed EMIs, defaults, or settled accounts can significantly reduce your score, while consistent on-time payments help build a strong credit profile.

    Credit Utilisation

    Another major factor is credit utilisation, which measures how much of your available credit you are using. Using a large portion of your credit limit, especially above 30%, can negatively impact your score as it signals higher credit dependency. Keeping credit usage low and well within limits reflects better financial discipline.

    Length of Credit History

    The length of your credit history also plays an important role. Credit bureaus look at how long you have been using credit and the age of your oldest active account. A longer credit history generally improves your score, which is why closing old credit cards or long-standing loan accounts may sometimes reduce it.

    Credit Mix

    Credit mix is also considered while calculating your score. A healthy balance of secured loans, such as home or car loans, and unsecured credit, like personal loans and credit cards, indicates that you can manage different types of credit responsibly. Relying heavily on only one type of credit may limit your score potential.

    Credit Enquiries

    Finally, credit enquiries influence your score. Each time you apply for a loan or credit card, lenders make a hard enquiry on your credit report. Multiple enquiries in a short period can lower your score, as it suggests higher borrowing risk. However, checking your own credit score is a soft enquiry and does not affect your score.

    Overall, credit scores are dynamic and change as your credit behaviour changes. Regular on-time payments, low credit utilisation, and responsible borrowing habits can improve your score over time, typically within three to six months. Credit scores may vary slightly across different bureaus, but the underlying factors used to calculate them remain largely the same.

    Advantages of Maintaining a Good Credit Score

    • Higher loan approval chances

      Lenders are more likely to approve your loan applications when you have a good credit score.

    • Lower interest rates

      A strong credit score can help you get loans and credit cards at lower interest rates, reducing overall borrowing costs.

    • Better credit card offers

      You become eligible for premium credit cards with higher limits, rewards, and exclusive benefits.

    • Faster loan processing

      Good credit scores often lead to quicker approvals with minimal documentation.

    • Higher credit limits

      Banks are more willing to offer higher loan amounts and increased credit card limits.

    • Pre-approved offers

      You may receive pre-approved loans and credit card offers based on your credit profile.

    • Improved financial credibility

      A good credit score reflects responsible financial behaviour and builds trust with lenders.

    • Greater financial flexibility

      Easier access to credit helps you manage emergencies and plan long-term financial goals confidently.

    Factors That Affect Your Credit Score

    • Payment history

      Timely payment of loan EMIs and credit card bills has the biggest impact on your credit score. Late payments, missed EMIs, defaults, or settlements can significantly reduce your score.

    • Credit utilisation

      This refers to how much of your available credit limit you use. High credit usage, especially above 30% of your limit, can negatively affect your score.

    • Length of credit history

      Credit bureaus consider how long you have been using credit. Older and well-maintained accounts generally improve your credit score, while closing old accounts may lower it.

    • Credit mix

      Having a healthy balance of secured loans (like home or car loans) and unsecured credit (like personal loans and credit cards) shows responsible credit management.

    • Credit enquiries

      Every time you apply for a loan or credit card, lenders make a hard enquiry on your credit report. Multiple enquiries in a short period can reduce your score.

    • Number of active accounts

      Managing too many loans or credit cards at the same time can increase risk perception and impact your score negatively.

    • Loan defaults and settlements

      Accounts marked as defaulted or settled have a strong negative impact and can stay on your credit report for several years.

    • Errors in credit report

      Incorrect personal details, wrong loan statuses, or unrecognized accounts can also affect your credit score if not corrected.

    Tips to Improve Your Credit Score

    • Pay all EMIs and credit card bills on time

      Timely payments have the biggest positive impact on your credit score. Even a single missed payment can reduce your score.

    • Keep credit utilisation low

      Try to use less than 30% of your total credit limit. High credit usage signals financial stress and negatively affects your score.

    • Avoid multiple loan or credit card applications

      Applying for several loans or cards in a short period leads to multiple credit enquiries, which can lower your score.

    • Maintain old credit accounts

      Older accounts help build a longer credit history. Avoid closing old credit cards unless absolutely necessary.

    • Use a healthy mix of credit

      Balance secured loans (home or car loans) with unsecured credit (credit cards or personal loans) to show responsible borrowing behaviour.

    • Clear overdue amounts quickly

      If you have missed payments or dues, clear them as soon as possible to limit long-term damage.

    • Check your credit report regularly

      Review your credit report for errors such as incorrect balances or unknown accounts and get them corrected promptly.

    • Avoid loan settlements if possible

      Settling a loan for less than the due amount can hurt your credit score more than closing it fully.

    • Limit credit card usage

      Spread expenses across cards if needed and avoid maxing out any single card.

    • Be patient and consistent

      Credit score improvement takes time. With disciplined credit behaviour, positive changes usually reflect within 3–6 months.

    Who maintains credit score

    In India, credit scores are maintained by credit bureaus, which are authorized organizations that collect and manage individuals' credit information from banks and financial institutions.

    Credit Bureaus in India

    The Reserve Bank of India (RBI) has licensed four credit bureaus to maintain credit records and generate credit scores:

    • TransUnion CIBIL

      The most widely used credit bureau in India. Most banks and lenders refer to CIBIL scores for loan and credit card approvals.

    • Experian India

      An international credit bureau that provides credit reports and scores used by many banks and NBFCs.

    • Equifax India

      Collects and maintains credit data and is used by several financial institutions.

    • CRIF High Mark

      Commonly used for retail loans, microfinance, and NBFC lending.

    How They Maintain Your Credit Score

    These credit bureaus receive data regularly from banks, NBFCs, and credit card companies about your loans, credit cards, repayments, and defaults. Based on this information, they calculate and update your credit score periodically. While the score may vary slightly between bureaus, the underlying credit behaviour used to calculate it remains largely the same.

    Important: You do not "maintain" your credit score yourself—your financial behaviour does. Credit bureaus only record and calculate it based on the data reported by lenders.