What is a Credit Score?

A credit score is like a grade that shows how well you've handled your money and debts. It's a number that banks and other companies look at to decide if they should lend you money or offer you a credit card. A higher score means you've been good with your money, while a lower score might make it harder to borrow money.

How a Credit Score is Calculated?

The major CICs are:

1. 1. CIBILTM
2. 2. Equifax
3. 3. Experian
4. 4. CRIF High Mark

These bureaus gather financial data from various lenders and financial institutions to compile your credit report, based on which they calculate your score.

The Key Factors Influencing Your Credit Score

Here are the key factors that authorized Credit Information Companies (CICs) or Credit Bureaus consider when calculating your credit score:

1. Payment History (35%)

The most significant part of your credit score is determined by your payment history. This includes the timeliness of your credit card payments, loan EMIs, and any other credit obligations. Late payments, defaults, and charge-offs can negatively impact your score.

2. Credit Utilization (30%)

This refers to the ratio of your current revolving credit (mainly credit cards) to your total available revolving credit. Keeping this ratio below 30% is considered healthy for your credit score as it indicates disciplined credit usage and management.

3. Length of Credit History (15%)

Longer credit histories generally contribute positively to your credit score, as they provide more data on your borrowing and repayment behavior. It includes the age of your oldest and newest credit accounts and the average age of all your accounts.

4. Credit Mix (10%)

Having a mix of different types of credit accounts, such as personal loans, home loans, credit cards, and auto loans, can be beneficial for your score. It demonstrates your ability to manage a variety of credit products.

5. New Credit (10%)

Every time you apply for a new line of credit, it involves a hard inquiry by lenders, which can temporarily lower your credit score. Opening several new credit accounts in a short period is a risky signal to creditors and can negatively affect your score.

What is a Good Credit Score?

A credit score is like a grade that shows how well you've handled your money and debts. It's a number that banks and other companies look at to decide if they should lend you money or offer you a credit card. A higher score means you've been good with your money, while a lower score might make it harder to borrow money.

Score Band	Category	Meaning
<300	No Score/No History	You've never borrowed money before, so you don't have a credit history. Start building one by getting a loan or credit card for future financial benefits.
300-550	Very Low Credit Score	Your credit history shows you've had trouble in the past, but you can fix it by checking why it's low and taking steps to improve.
551-620	Low Credit Score	Your credit history isn't great because of some past mistakes. It's important to fix these issues soon to be able to borrow money later.
621-700	Fair Credit Score	You're close to having a strong credit score. Keep working on it to get the best loan and credit card offers.
701-749	Good Credit Score	You've done well with your loans and credit cards in the past, making you a favorable candidate for most lenders.
750+	Excellent Credit Score	You have an excellent borrowing history, making you eligible for the best loan and credit card deals from most banks and NBFCs.