As banks and financial companies grow more cautious with lending in the midst of shifting interest rate trends, one thing is becoming crystal clear—your credit score could be the deciding factor between getting a loan approved or rejected.
A credit score isn’t just a number—it’s a reputation in digits. It’s a three-digit figure, typically between 300 and 900, that sums up your financial trustworthiness. The closer it is to 900, the better you're perceived as a borrower. Anything around 750 or above is generally seen as a green flag by banks and lending institutions.
These scores are dished out by licensed credit bureaus such as CIBIL, Experian, CRIF High Mark and Equifax, all operating under the watch of the Reserve Bank of India (RBI). These institutions crunch data about your past borrowing, repayment patterns, and even how much of your credit limit you're using, to arrive at your score.
Here’s where things get serious. Lenders are now required to report your credit activity to the bureaus at least once every 15 days. Which means if you’ve skipped an EMI or overused your credit card, it could get flagged fairly quickly. Even one missed payment could drag your score down, which might affect your chances the next time you apply for a loan or credit card.
Your credit score is shaped by various factors—how regularly you pay your EMIs, whether you’re juggling too many loans, what kind of credit you’ve taken (secured like home loans or unsecured like personal loans), and how much of your available credit you’re using. Keeping things balanced, paying on time, and avoiding over-dependence on credit are basic but effective habits to stay in good standing.
Don’t wait until your loan application is rejected to find out your credit score. Every individual is entitled to one free credit report every year from each of the four authorised bureaus. You can get it online from their official websites—no middlemen, no fees.
Keeping an eye on your credit report regularly can also help spot any inaccuracies or fraudulent activity before they spiral into bigger problems. It's like checking your bank statements—you may not always find issues, but when you do, it helps to catch them early.
If your score’s not looking too great, it’s not the end of the road. Paying off overdue amounts, avoiding back-to-back loan applications, limiting your credit usage, and slowly clearing outstanding balances can make a big difference. But it’s not an overnight job—it could take anywhere between six months to a year to see noticeable improvement, depending on your credit habits.
The key is consistency. The longer you stick to good financial behaviour, the more your score is likely to improve. And once you’re back in the ‘good books’, accessing loans or better interest rates might become easier.
(By arrangement with livemint.com)