What Is a Credit Score and Why It Is Important?
In today’s digital financial world, your credit score plays a crucial role in deciding whether your loan or credit card application gets approved. It is often the first thing lenders check before offering you any kind of financial product.
In this blog, we’ll explain what a credit score is, how it works, why it is important, how it is calculated, and how you can improve it.
In this blog, we’ll explain what a personal loan is, how it works, its benefits, eligibility, documents required, and important things to consider before applying.
What Is a Credit Score?
A credit score is a 3-digit number that represents your creditworthiness. It shows how responsibly you have managed your past loans and credit cards.
In India, credit scores usually range from 300 to 900.
The higher your score, the better your chances of getting loans at lower interest rates.
You can use a personal loan for almost any purpose, including:
Medical emergencies
Wedding expenses
Education fees
Travel or vacations
Home renovation
Debt consolidation
Lifestyle or personal needs
In this blog, we’ll explain what a personal loan is, how it works, its benefits, eligibility, documents required, and important things to consider before applying.
Why Is Credit Score Important?
Your credit score helps lenders assess the risk of lending money to you. It impacts:
Loan approval or rejection
Interest rates offered
Loan amount eligibility
Credit card approvals
Faster loan processing
A good credit score means lenders trust you as a responsible borrower.
What Is Considered a Good Credit Score?
| Credit Score Range | Meaning |
|---|---|
| 750 – 900 | Excellent |
| 700 – 749 | Good |
| 650 – 699 | Fair |
| 600 – 649 | Average |
| Below 600 | Poor |
A score of 700 or above is generally considered good for most loans in India.
How Is a Credit Score Calculated?
Your credit score is calculated based on multiple factors:
1. Payment History (Most Important)
Paying EMIs and credit card bills on time has the highest impact on your score.
2. Credit Utilization Ratio
This shows how much of your available credit limit you are using.
Using less than 30% of your limit is ideal.
3. Credit History Length
Older credit accounts with a good repayment record improve your score.
4. Credit Mix
A healthy mix of secured loans (home loan, car loan) and unsecured loans (personal loan, credit card) helps.
5. New Credit Applications
Applying for multiple loans or cards in a short period can negatively affect your score.
