Is Your Credit Score Hurting You? Here's How to Fix It

A credit score is a numerical measure of an individual's creditworthiness, which normally ranges from 300 to 900 in India and is determined by their credit history, repayment habits, and debt management.

Since credit scores are used by lenders to determine repayment dependability, having a high credit score is essential for obtaining loans, credit cards, or mortgages at advantageous interest rates.  Sometimes it might even affect job applications or rental agreements.

What Is a Bad Credit Score in India?

As per CIBIL (Credit Information Bureau India Limited), any credit score lower than 650 is typically regarded as poor. Following is the categorisation of credit scores:

750 – 900: Excellent

700 – 749: Good

650 – 699: Fair

Below 650: Poor

A low score can result in loan denials, increased interest rates, or restricted access to credit cards. Most lenders are now employing automated software to review applicants, and a low score may often result in your application being denied even before it is seen by a loan officer.

Why Is a Low Score a Problem?

A poor credit score typically happens due to defaulted EMI payments, excessive credit usage, numerous loan inquiries, or defaulting on loans. These habits are considered risky by lenders, and they impact your ability to obtain future credit.

Transparency in lending and online banking in recent trends have facilitated institutions to determine credit behavior in real time, leaving consumers with low scores at a disadvantage.

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How To Improve Your Credit Score

If your score is low, do not worry. Here are the best ways to improve it and manage your expenses accordingly.

Pay EMIs and credit card dues on time

Keep your credit utilization level under 30%

Do not take multiple loans at the same time

Regularly check your credit report for mistakes

Have a healthy mix of secured and unsecured loans

According to a TransUnion CIBIL study, customers who enhance their credit repayment and usage history have an average 65-point improvement in their score over a 6-month period.

A poor credit score isn't the end of your journey, and just an indicator that you need to get in control. By adopting healthy money habits and tracking your account regularly, you can establish a solid credit report and gain better access to finance options in the future.