A credit score is a three-digit number between 300 and 900 that summarises how you have handled borrowed money. Lenders use it, along with income and other checks, to decide whether to approve a loan or credit card and at what rate.
A score is not a permanent verdict. It changes as your repayment behaviour, credit utilisation and credit history change. This guide explains what goes into it and what you can realistically do to improve it.
What is a credit score?
A credit score is produced by a credit bureau such as CIBIL, Experian, Equifax or CRIF High Mark. It is based on the credit accounts reported by lenders: loans, credit cards, overdrafts and some utility or telecom payments. The score is a snapshot, not a full credit report.
Lenders also look at your credit report, income, employment, existing obligations and the loan-to-value ratio. A high score helps, but it does not guarantee approval.
The score range
Typical credit score bands
| Score | Band | What it usually means |
|---|---|---|
| 300–549 | Poor | Approval is difficult; expect high rates or collateral requirements. |
| 550–649 | Fair | Some lenders may approve, often at higher rates. |
| 650–749 | Good | Reasonable approval odds; pricing depends on the lender. |
| 750–900 | Excellent | Strong approval odds and better negotiating power. |
The exact cut-offs vary by lender and product. A score of 720 may be enough for one bank and not for another. Some lenders also use their own internal scoring models.
What moves your score
Common credit score factors
| Factor | Typical weight | What helps |
|---|---|---|
| Payment history | High (about 30–35%) | Pay on time, every time. |
| Credit utilisation | High (about 30%) | Keep balances low relative to limits. |
| Credit history length | Moderate (about 15%) | Keep older accounts open. |
| Credit mix | Low (about 10%) | A healthy mix of secured and unsecured credit. |
| New credit enquiries | Low (about 10%) | Avoid frequent loan or card applications. |
Bureaus do not publish their exact formulas, and the weights above are indicative. The practical takeaway is simple: pay on time, keep utilisation low and do not apply for credit you do not need.
Payment history
A single missed payment can stay on your report for years and can have a large impact, especially if you have a short credit history. Set up auto-debit or reminders for every card and loan. If you miss a payment, pay it as soon as possible and contact the lender.
Minimum due is not full payment
Paying only the minimum due on a credit card avoids a late fee but leaves a revolving balance. It can keep utilisation high and cost 30–40% annual interest. Pay the full statement balance whenever possible.
Credit utilisation
Credit utilisation is the percentage of your available credit limit that you use. If you have a ₹1 lakh limit and a ₹80,000 balance, utilisation is 80%. Keeping it below 30% is a common guideline; below 10% is better for your score.