What is Credit Score?

A Credit Score is a parameter that decides if you’re fit to be given a loan. When lenders like banks want to find out whether you’re able to repay their loans they look at your credit score to determine your “creditworthiness”. If you have a good credit score then the probability of securing a loan is higher and a lower credit score will see your loan request denied.

In India, there are four institutions that deal in credit scores. They are Credit Information Bureau India Limited (CIBIL), Highmark, Experian and Equifax. All four companies are licensed by the Reserve Bank of India.

A credit score ranges between 300 to 900 according to CIBIL, with 300 being the lowest and 900 being the highest.

How is Your Credit Score Calculated?

Factors	Weightage	What it means
Repayment History	30%	Your credit score is affected by how regularly you pay your monthly EMIs. On-time repayment boosts your credit score while defaulting negatively affects it.
Credit Usage	25%	The age of your credit accounts like loans and credit cards and the regularity of your payments affect your score. The older the accounts with no missed payments the better your credit score.
Credit Mix & Length	25%	A mix of secured and unsecured loans and how long you’ve had them your credit score. Secured loans refers to home loans and car loans and unsecured loans refers to personal loans and credit cards.
New Credit	20%	If you apply for new credit cards or loans a credit score check is done by the concerned financial institution. Every check affects your score. So more number of checks means a lower score.

What is a Good Credit Score?

According to CIBIL ratings, your credit score ranges between 300 and 900. Check out the below table to see what a good credit score looks like:

Score	What it means
Less than 300	You have no credit history because of no existing credit cards or loans.
300-550	You have a very poor credit score and you won’t be able to secure a loan.
551-620	Your credit score is still fairly poor and needs immediate attention.
621-700	This is a fairly healthy credit score but still not enough to easily secure a loan.
701-755	You have a good credit score and you can get loans at better interest rates.
Above 755	This is an excellent credit score and you can secure loans at the best interest rates.

How to Find Your Credit Score?

Official bureau’s in India can help you determine your credit score. Follow these three simple steps to generate your credit report.

Step

Log on to Bureau Website

Log on to an official bureau’s website like CIBIL to begin generating your credit score report.

Step

Enter Your Details

Provide information like name, number & email ID. Enter these details to fetch your report.

Step

Download Report

A report is generated based on your repayment history & will be sent to your registered email ID.

How can You Improve Your Credit Score?

Your credit score is based on your credit history. Better your credit history, better your credit score will be. It takes time and consistent efforts to have a good credit score. Here are some steps you can take to improve your credit score:

Manage Your Payment History

Ensure that you pay all of your credit card bills, EMIs and loans on time, every time. Even a single missed payment can lower your credit score.

Monitor Your Credit Usage

Avoid maxing out your credit card limit. Maintain your credit utilisation ratio by regularly paying your outstanding balance.

Maintain the Length of Credit History

Don’t close your old credit cards and accounts. A longer credit history shows responsible credit use and repayment.

Have a Good Credit Mix

Regularly check your credit report for any errors. If you find any inaccuracies, get it rectified from the credit bureau.

Monitor Credit Report

Regularly check your credit report for any errors. If you find any inaccuracies, get it rectified from the credit bureau.

Reduce New Credit

Open new credit accounts only when you need it. Avoid applying for new credit instruments in a short period of time.

Benefits of Having a Good Credit Score

Having a good credit scores shows your creditworthiness. This means that banks, lenders and other financial institutions view you as someone who is capable of repaying loans on time.