What is Credit Score?

A credit score is generally the numerical representation of an individual’s creditworthiness. It is a three-digit number ranging from 300 to 900 which tells about your credit accounts, total debts, repayment history, and other related information based on credit reports.

Credit score is calculated based on the following factors:

• Repayment history


• Credit Utilisation


• Credit history


• Credit mix


• New Credit enquiries

It is recommended to check your credit score on a regular basis as it helps you stay informed about your credit health. According to experts, it is good to monitor your credit score every quarter. There are several websites and apps that allow you to check credit scores for free or low cost. You must also check your credit score before applying for a new loan or credit card.

The major factors that can impact your credit score include:

• Repayment history – avoid late payments, defaults, and missed payments to keep a good credit score


• Credit accounts – Avoid high utilisation of your credit amount


• Credit history – Longer credit history with on-time payments is always considered good


• Recent credit enquiries or applications – Keep your enquiries and applications low


• Credit Mix – Keep a mix of loans, credit cards, and other such accounts for a good credit score

Well, checking your own credit score doesn’t really affect it as it is often termed as soft enquiry. Your credit score is only affected when a lender or a financial institution checks your credit by getting the report from credit bureaus. This happens only when you apply for a loan or credit card.

Your credit score affects your loan interest rates significantly. If you have a higher credit score, let’s say 700 or above, it means you have a good credit history with great on-time payments. In such cases, lenders and financial institutions are happy to provide you with lower interest rates. However, if you have a credit score below 700, or usually below 650, lenders may consider you a higher credit risk. As a result, they may offer you loans with higher interest rates to compensate for the perceived risk.

Yes, it is very common to have multiple credit scores as there are many credit bureaus like CIBIL, Equifax, Experian, and CRIF High Mark. All of these bureaus maintain your credit report, on the basis of which they produce your credit score every month. Hence, it is always advisable to check your credit score with these important credit bureaus regularly, though CIBIL score is mainly considered by financial institutions in India.

A credit score ranges from 300 to 900 and these numbers determine your creditworthiness. Individuals having a credit score in the range of 300-500 are considered to have poor credit. While a score between 501 and 700 is considered a fair credit score, a score between 701 and 750 is considered a good credit score. People with a credit score between 751 and 900 have an excellent credit score.

Late payments or missed payments have the worst effect on your credit score as your payment history is what defines your credit score. Apart from incurring late fees and penalties, your credit score will also be lowered. However, this usually happens only when the payment is 30 days or more overdue. To minimise the impact of late payments, always strive to pay bills on time, even if it’s just the minimum amount.

Well, the negative information on your credit report, which is often in the form of late payments and defaults, cannot be removed if it is accurate and reported legitimately by the bureaus. However, there are some steps you can take if you wish to change it:

• Pay off the outstanding amount


• Dispute errors with the credit bureaus and ask them to investigate


• Negotiate with creditors

It is always recommended to keep your credit ultimatum below 30% of the available credit. Using the maximum amount from your available credit can negatively impact your score. On the other hand, having a higher total credit limit across all your accounts can be beneficial for your credit score as it will increase your credit capacity and can help keep your credit utilisation rate lower.

Absolutely, you can build your credit score without a credit card. You can avail yourself of secured loans and credit builder loans to build your credit score. You can also rely on rent and utility payments and credit builder products to establish credit.

Yes, if you have an old credit account and you wish to close it, then it can potentially affect your credit score. This is because the length of your credit history accounts for about 15% of your overall credit score. So, if your account age is shortened under any circumstance, your credit score will be impacted.

Different types of credit information can stay on your credit report for varying lengths of time. Here’s an insight for you:

• Positive accounts can remain on your credit report as long as they are open and in good position


• Late payments and defaults can stay for up to 7 years


• Closed accounts with no negative history can stay for up to 10 years


• Public records such as civil judgements can stay up to 7 years or more


• Hard enquiries usually stay for a period of up to 2 years

If you are filing for bankruptcy, then be prepared to witness a significant drop in your credit score as bankruptcy remains on your credit report for an extended period usually up to 10 years. Moreover, after bankruptcy, you may find it challenging to qualify for new credit accounts, and if you do, they often come with higher interest rates and less favourable terms.

Yes, you can dispute errors on your credit report. Here’s what you can do: send a letter to the credit reporting agency, explain what went wrong, and provide documents to support your claim. There is no fee for disputing a credit report.

Ideally, renting an apartment should not be affected by your credit score. However, there can be cases where the landlord might ask you to show your credit report.

A soft credit inquiry takes place when you are checking your own credit score or have been provided with a pre-approved credit scheme. Whereas a hard credit inquiry takes place when you apply for a loan or a credit card.

Whenever you apply for a loan, your credit score gets depleted slightly. Therefore, it is always advised that you do not apply for loans from multiple banks in a short period of time.

Having a co-signer to help you with a personal loan or a short term loan is a great way to reduce your interest rate. It can also help when you are not able to get a loan from the bank with your own credit score.

If you have a bad credit score, then your insurance premium will definitely go higher. A low credit score means that a person is high-risk, which is why insurance premiums are also inflated.

No, it is not possible for you to transfer the credit score across countries. Every nation in the world has its own credit rating methods, which makes it non-transferable.

Getting married or divorced can impact your credit score, depending upon your spouse. For example, if they have a good credit score, it might boost yours as well when you get married. Or during a divorce, your credit score could improve because you are now separated from your spouse, who had a bad credit rating.

No, credit scores cannot be inherited. Your credit score is only based on your credit history.

It can pose a major scare to your credit score. With identity theft, the other person can completely misuse your funds, and your credit score will end up facing the brunt of all the unpaid payments or EMIs.

Yes, you can always opt out of pre-approved credit offers from banks.

When you enrol in such programs, it usually involves closing all the older accounts and creating a new one with a lower interest rate. However, it impacts your credit score because your credit utilisation ratio is increased.

A “thin file” or “no file” credit history means that you have very little or no credit history. This can make it difficult to get approved for loans and credit cards, as lenders will have less information to assess your creditworthiness.

Student loans can have a positive or negative impact on your credit score, depending on how you manage them. If you make your payments on time and in full, your student loans can help to improve your credit score. However, if you miss payments or default on your student loans, it can damage your credit score.

Yes, you can refinance a loan to improve your credit score. This is because refinancing can lower your interest rate, which will decrease your monthly payments and your credit utilisation ratio.

Credit scores can differ across credit bureaus because each bureau uses its own scoring model. However, the differences are usually small and will not have a significant impact on your overall credit score.

Your employment history does not directly impact your credit score. However, it can indirectly impact your credit score by affecting your income and your ability to repay your debts.

Here are some of the ways to establish credit for the first time: get a secured credit card, take out a small loan and repay it on time to show that you can be trusted with credit.

In ideal cases, utility bills have very little impact on your credit score. Regardless, it is important to pay your utility bills on time.

Joint accounts affect the credit scores of both account holders. If one account holder makes a late payment or defaults on the loan, it will hurt the credit scores of both account holders.

Unpaid medical bills may usually not impact your credit score. Even if it does, it might take a lot of time for it to reflect on your credit score. However, it is always a good idea to pay all your bills on time.