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LoansJagat Team

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5 Min

02 Jun 2025

How To Know Your Credit Score – Step-by-Step Guide

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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.

 

"Why?" she questioned.

 

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.

 

Why Does Your Credit Score Matter?

 

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.

 

How is Your Credit Score Calculated?

 

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.

 

What Happens if You Ignore Your Credit Score?

 

Ignoring your credit score is like not reviewing your exam results and hoping to gain admission anywhere. You could face:

 

  1. Loan denials and high interest rates
  2. Difficulty getting rental agreements
  3. Denial of career opportunities in finance

 

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.

 

Conclusion

 

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.

 

FAQs


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

How to Check CIBIL Score

How to Know Your Credit Score

How to Increase CIBIL Score

How to Calculate Company Valuation

How to Reset EPFO Password

How to Claim PF Amount

 

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About the Author

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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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