Credit Score: Stay One Step Ahead For Your Finances


What are the chances that a person who lends money would return it? How do banks determine whether they should lend you any money or not? What helps them decide if you are the right person to extend the credit line? Why did you not get that car loan you needed three years ago? Are you wondering and still don’t know the answers to these questions? If not, you are at the right place because we are here to answer your questions and give you much-needed information about your credit score.

Banks, NBFCs, or any banking or non-banking institution only lend you credit if you are worthy of it. The criteria to determine worthiness is called creditworthiness. But how do they find out the creditworthiness? The answer is Credit Score!

You must have heard this term multiple times. So, what is the credit score?

The credit score is the number that lenders use to determine if they should lend money to a borrower. Ranging between 300-900, the score represents the creditworthiness of a borrower. The lower the number, the higher the risk. It is divided into four different ranges, which are as follows:

300-599: A score between this range is considered bad, signifying that the borrower is more likely to default on a loan.

600-699: If the score ranges from 600 to 699, it is considered average, which means he/ she is a high-risk borrower.

700-779: A borrower who has a score between 700 to 779 is considered a low-risk borrower. It means that the borrower is unlikely to default on the loan.

780-900: A score that ranges between 780 to 900 denotes that the borrower is highly unlikely to default the loan.

This brings us to how well do you know your score and which factors affect it?

Five main factors have a major impact on your credit score. These factors are further divided into three categories, namely low, medium, and high impact. Let us have a look at how these factors impact your score and how much.

Payment History

Payment history accounts for 35% of the impact, and it is the most important factor while determining your credit score. It has a high impact on your score. If a borrower cannot make timely payments for his/ her credit card, personal loans, or EMIs, her/ his score would have a negative impact. This negative impact stays on your credit report for a long time. Failing to pay monthly bills timely leads to a decrease in your credit score. We hope now you know why everyone wants to pay their credit card bills first thing after payday.


If we go by dictionary, indebtedness is the condition of being indebted. In terms of credit score, it means the total amount you owe at one point in time. Indebtedness also has a high impact on your score and accounts for 30% of your score. It is also known as the Credit Utilization Ratio, and indebtedness is the amount of money you owe each of your lenders and how much revolving debt you are in.

Credit Age

Credit age, as the name suggests, is the average of your oldest and newest credit account. It has a medium impact of 15% on your credit score. Bottom line, the longer the credit age, the higher the credit score. Even though it seems trivial in nature, one should not ignore that having new credits can negatively affect your scores.

Credit Type

There are two kinds of credits or loans one can take: secured and unsecured. If you asked around, most people would have unsecured loans in the form of credit cards, personal loans, consumer loans, private student loans, etc. Even though it has a low impact of 10%, it should not be disregarded. A good mix of credits works the best, but what is a good mix? A good mix refers to having different kinds of secured and unsecured loans, for example, credit cards, personal loans, automobile loans, mortgages etc. A borrower who has a balanced mix of loans tends to have a higher credit score.

Credit Inquiries

Believe it or not, it is one of the most overlooked factors. It carries a low impact of 10% but should not be ignored. Many people, when in need, keep making loan applications to get another loan. It is not wise to approach too many lenders in a short period of time. The more credit inquiries and rejections, the harder the impact on credit score.

At this point, you know what impacts your credit score and how much. We are sure we have at least answered a few questions for you. But now, the important thing is how you can improve your credit score. There is no quick fix to improve your credit score, so be attentive when applying for new credit cards or loans.

Here are a few tips on how you can improve your credit score:

  1. Make timely payments as having negative information on your credit report remains for a long time.
  2. Don’t just pay the minimum amount; it signifies that you are barely getting by. Though it doesn’t have an immediate effect on your score, it is considered that you are having a difficult time and might need credit in the future.
  3. Keep a check of your credit score and raise a dispute if there are any discrepancies. To err is human, so there can be mistakes in your credit report. If you find anything wrong, reach out to the bureau and get it corrected as soon as possible.
  4. Apply for new credit or loan only if needed; multiple applications lead to multiple inquiries, which result in a negative impact on your credit score.
  5. Don’t close old unused credit cards, as having a longer credit history positively impacts your score.

If you are struggling to pay off your debt and your accounts are delinquent, you can reach our trained debt consultant. They can advise you on a possible solution as per your condition and number of accounts. In case you are looking for debt settlement services, you can call us on 0124-6663666.

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