Author
LoansJagat Team
Read Time
5 Min
02 Jun 2025
Sonal, a young working professional who earns ₹45,000 in Pune, was excited to book her dream car worth ₹13,00,000. She went confidently into the showroom, finalised the model, and sat down to begin the loan procedure. Within minutes, her joy faded her loan was denied.
The executive responded, "Your credit score isn't good enough."
Sonal was confused. "What is the credit score? What is that? I have never taken a loan before!"
Her doubt was very common. Many Indians are unaware of the critical role that credit ratings play in financial decisions, whether for credit cards, housing loans, or rental agreements.
Let's go over everything, from what credit scores are to how you can check yours for free (without impacting it) and, most importantly, how to increase them.
What is a Credit Score?
A credit score is a three-digit number that measures your creditworthiness. It shows banks and lenders how likely you are to repay your loans based on your previous credit history.
Credit scores in India usually range between 300 and 900.
Score Range | Category | Meaning |
750 – 900 | Excellent | Very low-risk borrower |
700 – 749 | Good | Generally eligible for credit |
650 – 699 | Fair | May get credit, but at higher interest rates |
600 – 649 | Poor | Low chance of loan approval |
Below 600 | Very Poor | Likely to be denied credit |
Example- Assume you had a credit score of 785 and got a home loan of ₹30,00,000 at an interest rate of 8%. Your friend, with a lower credit score of 610, was offered the same loan at 9.5%, For almost 20 years, you paid ₹15,09,000 in interest, whereas your friend paid ₹19,13,000 a difference of almost ₹4,00,000 just due to credit ratings.
Pro tip: A credit score of 750 or higher is usually regarded as good for loans and cards.
Who Calculates Your Credit Score?
In India, four major credit bureaus are permitted to determine your credit score.
Credit Bureau | Full Form | Founded | Official Website |
CIBIL | Credit Information Bureau (India) | 2000 | www.cibil.com |
Experian | Experian India Credit Information | 2010 | www.experian.in |
Equifax | Equifax Credit Information Services | 2010 | www.equifax.co.in |
CRIF High Mark | Centre for Research in Financial Services | 2007 | www.crifhighmark.com |
Each of them may provide slightly different scores based on their algorithm, although the differences are relatively low.
Sonal if your credit score is the first impression when purchasing a home, applying for a credit card, or taking out a loan for college.
Use Case | Impact of a Good Credit Score |
Credit Cards | Higher credit limit + premium card offers |
Personal Loan | Faster disbursement + better terms |
Employment (Finance) | Some employers check it for sensitive roles |
Renting a House | Preferred by landlords (yes, they check it too!) |
Home Loan | Lower interest rate + higher approval chances |
So, Sonal, even if you don't borrow right now, establishing a strong credit score early on will save you hundreds (if not lakhs) later.
Let’s decode what goes into those three digits.
Factor | Weightage | What does It mean? |
Payment History | 35% | Have you paid your EMI and credit card bills on time? |
Credit Utilisation Ratio | 30% | How much of your credit limit have you used? |
Length of Credit History | 15% | Older accounts increase your score. |
Credit Mix | 10% | An appropriate balance between unsecured (credit card) and secured (home loan) debt |
New Credit Inquiries | 10% | Too many loan applications can damage your credit score. |
Example- Suppose you utilised 60% of your credit card limit, which was ₹1,00,000, on a regular basis. But also missed two EMI payments and applied for two new credit cards in three months. These circumstances can bring your credit score down from 740 to 660.
Sonal ma’am, “Your score isn’t built in a day. Consistency is key.”
Common Myths Around Credit Scores
Let’s bust a few myths that confuse people:
Myth | Reality |
Checking my score reduces it. | Only lenders' "tough enquiries" have an impact on it. |
I don’t have a loan, so I’ll have a good score | No credit history frequently implies no score. |
Credit cards are harmful to your credit score. | Not if you utilise them carefully and pay on time. |
Closing previous accounts helps my score. | It can affect your score (shorten your history) |
Paying the minimum due is sufficient. | No, it can damage your payment history and result in interest. |
Ignoring your credit score is like not reviewing your exam results and hoping to gain admission anywhere. You could face:
Having trouble getting international credit cards?
For example, Sonal discovered an overdue credit card balance of ₹3,000 that had accumulated penalties. After clearing it and waiting a few months, her score increased to 770, and her auto loan was accepted.
Your credit score is not just a number; it is your financial fingerprint. Knowing, tracking, and improving it gives you control over all significant financial decisions, from home purchases to trips.
Making the first effort to check your credit score is powerful in India, where financial literacy is still growing.
Knowing your credit score ensures that you have control over your finances, whether you are a senior searching for retirement or Sonal buying her first car.
Spend 5 minutes today checking your score, understanding the report, and positioning yourself for better credit alternatives.
Is it really free to check my credit score?
Yes! Every year, each bureau must issue one free credit report (including the score).
How often should I check my credit score?
Once every three months is preferable, especially before making important financial decisions.
Will closing a credit card affect my credit score?
It might, especially if the account is old. Keep it open unless absolutely required.
What is a suitable beginning point for someone who has no score?
Apply for a secured credit card or a small personal loan to start building your credit history.
I discovered a mistake in my report. What shall I do?
File a dispute with the credit bureau promptly on their website. They are expected to investigate and rectify the situation.
Other Pages - Financial Calculations & CIBIL Score | ||
About the Author
LoansJagat Team
We are a team of writers, editors, and proofreaders with 15+ years of experience in the finance field. We are your personal finance gurus! But, we will explain everything in simplified language. Our aim is to make personal and business finance easier for you. While we help you upgrade your financial knowledge, why don't you read some of our blogs?
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