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| What Is a Credit Score and How Can You Improve Yours? |
What Is a Credit Score?
A credit score is a three-digit number that shows how trustworthy you are when it comes to repaying borrowed money. In India, this score is usually given by credit bureaus like CIBIL, Experian, Equifax, and CRIF High Mark. Out of these, the CIBIL score is the most widely used. The score ranges from 300 to 900. The closer your score is to 900, the better your credit health.
If you have a high credit score, it means you are good at managing loans and credit. It tells banks and lenders that you are likely to repay on time. On the other hand, a low credit score shows risky behaviour, like missing EMIs or using too much of your credit limit.
Why Is Your Credit Score Important?
Your credit score affects many important financial steps in your life. When you apply for a personal loan, home loan, or even a credit card, the bank checks your score first. A good credit score increases your chances of getting approved, and you might even get better interest rates. But if your score is low, the bank might reject your application or offer a higher interest rate.
Even mobile phone EMIs, buy-now-pay-later apps, or credit-based shopping platforms check your score nowadays. So having a healthy credit score is not just for big loans anymore — it’s part of your everyday life.
How Is a Credit Score Calculated?
Credit bureaus consider different factors when calculating your score. One of the biggest factors is your payment history. If you always pay your EMIs and credit card bills on time, your score improves. But if you miss payments, even by a few days, it can bring your score down.
Another important part is how much credit you use compared to your total limit. For example, if your credit card limit is ₹1,00,000 and you use ₹90,000 every month, it shows high credit usage and may hurt your score. Using 30% or less is usually seen as a good sign.
The age of your credit accounts also matters. If you’ve had a credit card or loan account for many years and managed it well, it builds your credit history. Having a mix of credit types — like a home loan, a car loan, and a credit card — also helps in showing that you can handle different kinds of credit responsibly.
Steps to Improve Your Credit Score in India
If your score is low or you are just starting to build your credit history, there are many simple ways to improve it. The most important thing is to always pay your EMIs and credit card bills before the due date. Even a small delay can affect your score, so set reminders or use auto-pay if needed.
Try to keep your credit card usage low. Don’t max out your card limit, and if possible, pay the full amount instead of just the minimum due. Also, avoid applying for too many loans or credit cards at once. Every time you apply, the bank checks your score, and too many checks in a short time can hurt your credit rating.
It’s also good to check your credit score and credit report from time to time. You can get one free report every year from each credit bureau. Sometimes, there are errors in the report, like wrong loan entries or incorrect personal details. If you find something like that, you should raise a dispute and get it corrected.
If you’re new to credit, consider getting a secured credit card, which is backed by a fixed deposit. This is a safe way to build your credit history without taking big risks.
Final Thoughts
Your credit score is like your financial reputation. In India, more and more services are checking your score before giving you access to credit, so it’s important to take it seriously. A good credit score can make your life easier by helping you get loans faster, at better interest rates, and with more options.
Improving your credit score doesn’t happen overnight, but with the right habits — like timely payments, smart credit usage, and regular checks — you can see a positive change over time. So start today and take control of your financial future, one step at a time.
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