Your One-Stop Guide to a Good Credit Score!

Credit Cards


Aug 21, 2020

Lower Interest Rate

Higher Credit Limit

Favourable Repayment Tenure

Faster Approval and Disbursement

A good credit score can help you achieve all of the above while applying for any form of credit, such as loans or credit cards?

Women in India are increasingly becoming aware of the advantages of good credit scores and getting more credit-worthy. The average credit score of millennial women borrowers in India, is 734 - a considerably higher number than their male counterparts whose average score is 726.

So let’s understand that one thing that makes or breaks your chances of getting a loan – a Credit Score.

What is a Credit Score?

A credit score is a 3-digit number allotted to you by a credit bureau that defines your creditworthiness and repayment capacity.

Who determines my Credit Score?

In India 4 Credit Bureaus - TransUnion CIBIL, Equifax, Experian and CRIF Highmark, generate credit reports that contain the credit score of an individual. CIBIL is the most popular and often the term CIBIL Score is used in place of credit score. Lenders refer to these credit scores to decide if you are eligible for a loan.

What is an ideal Credit Score?

Credit scores range from 300 to 900. The higher your score the better is your chance to get a loan or credit card. Most banks and non-banking financial corporations (NBFCs) have minimum eligibility for a score of 750 to give loans. In fact, 79% of loans are sanctioned to persons with a score greater than 750.

If you are planning to take a loan, a high credit score not only increases your chance of getting a loan but also enables you to negotiate the repayment terms.

What impacts my Credit Score?

While there are several factors that determine your credit score, these are the here 5 most important factors that determine your credit score.

  1. Credit history: The credit bureau has a monthly record of the last 3 years of your payments towards your EMIs and credit card bills. Late payments or defaulting on your dues negatively impact your credit score.

  2. Credit utilisation: This indicates your total outstanding debt compared to your credit limit. If the outstanding balance on your credit cards is high, there is a negative impact on your credit score.

  3. Credit mix: More unsecured loans (personal loans, credit card) than secured loans (home loan, car loan) will negatively impact your credit score.

  4. Existing loans and loan applications: Too many repayment obligations or excessive need for credit have a negative impact on your credit score.

  5. Debt to Income Ratio: Your debt obligations as compared to your income, impact the credit score. Higher your debt compared to your income, the more detrimental it is to your credit score.

How can I improve my Credit Score?

  • Maintain a balance between your secured loans and unsecured loans. Ideally, not more than 30% of all your loan amounts should be unsecured.

  • Ensure your total EMIs are less than 40% of your monthly income.

  • Ensure you have a maximum of 2 loans at any given time to ensure you can repay your EMIs with ease.

  • Pay EMIs and credit card bills by setting monthly reminders and auto-debit facilities. Ideally, you should pay your dues as soon as you receive your salary to avoid facing a cash crunch when the due date arrives.

  • Pay the entire outstanding credit card bill and NOT just the minimum payment amount.

  • Utilise only up 30% of the available credit limit on your credit card. Try to get your credit card limit increased while ensuring your credit card usage remains the same. This will ensure lower credit utilization and in turn, improve your credit score. We recommend this only if you have self-discipline while using your credit card.

How can I determine my Credit Score?

Most loan aggregators and banks provide credit score calculators on their websites. However it is advisable to obtain a credit report and credit score through any of the 4 licensed credit bureaus, CIBIL being the most popular. The credit bureaus provide 1 free credit report and credit score per year.

You will have to provide details of your PAN Card, Aadhaar Card and your existing loans and credit cards.

Can I check my Credit Score whenever I want?

Yes! Checking your credit score on the website of a licensed credit bureau out of curiosity or inquisitiveness is called a ‘soft enquiry’. A ‘soft enquiry’ does not impact your credit score and is completely fine. In fact, we recommend you check your credit score once a year.

However, when you apply for a loan or credit card, the bank or NBFC will raise a request for your credit score. This is called a ‘hard enquiry’. Multiple hard enquiries in a short period of time negatively impact your credit score. Thus it is advisable to not apply to multiple lenders or for multiple loans in a short duration.

Bottom Line

When it comes to good credit scores, women lag behind due to multiple reasons. However implementable practices like repaying EMIs and credit card bills on time and borrowing smartly can help you maintain a good credit score. The most important thing to remember is that credit information is not permanent and you can always improve your score.

Stay tuned as we discuss loans and credit scores this entire month!

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This article is written by Namrata Patel for Basis.

Basis is a first-of-its-kind platform, aimed at enabling women to achieve financial independence through expert advice, in-app knowledge Boosters and supportive communities.


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