Understanding Credit Score
Your credit score (CIBIL score in India) is a 3-digit number (300-900) that represents your creditworthiness. Lenders use this score to decide whether to give you a loan and at what interest rate. A higher score means better loan terms and lower interest rates.
| Score Range | Rating | What It Means |
|---|---|---|
| 750-900 | Excellent | Best interest rates, instant approvals, premium credit cards |
| 700-749 | Good | Good rates, most loans approved, decent credit cards |
| 650-699 | Fair | Higher rates, some rejections, limited options |
| 550-649 | Poor | High rates or rejection, limited to secured options |
| Below 550 | Very Poor | Most applications rejected, needs urgent repair |
How to Improve Your Credit Score
- Pay Bills on Time (35% impact): Set up auto-pay for all EMIs and credit card minimum payments. Even one missed payment drops your score significantly.
- Keep Credit Utilization Low (30% impact): Use less than 30% of your credit card limit. If your limit is ?3 lakh, keep outstanding below ?90,000.
- Maintain Old Accounts (15% impact): Don't close old credit cards — length of credit history matters. Use them occasionally to keep them active.
- Limit New Applications (10% impact): Each loan/card application triggers a hard inquiry. Too many inquiries signal desperation and lower your score.
- Mix of Credit (10% impact): Having both secured (home loan) and unsecured (credit card) credit shows you can manage different types.
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