Credit Score Awareness

Nov 22, 2022

4 min. Read


Authored By: L&T Finance

Credit Score AwarenessOthers

Credit Score is a numerical expression of your creditworthiness. A good credit score assures lenders, like banks and NBFCs, that you are capable of paying back the borrowed amount. It could also entitle you to better deals like lower interest rate, higher credit limit, higher loan amount and longer tenure.

Credit score is evaluated by Credit Bureaus based on analysis of your credit history. Financial institutions, like banks and NBFCs, can check an individual's credit score with any of the bureaus.

Closing this loop, details about all your transactions, relevant to credit score calculation, are sent to the credit bureaus by banks and NBFCs. They have been mandated by the RBI to do so.

Credit bureaus track information like credit mix, credit utilization, credit balance, new credit, tenure, and repayment history. They collect this information, formulate a Credit Report, and assign your credit score.

There are four credit bureaus, or credit information companies, licensed by the RBI in India. They are the Credit Information Bureau (India) Limited (CIBIL), Experian, Equifax and CRIF High Mark.

All credit bureaus have their own scoring system but their evaluation stands irrespective of which one gives the credit score. Most common in India is a CIBIL credit score which is a three digit number ranging between 300-900.

Advantages and Benefits of applying for a Credit Score Awareness:


CIBIL score close to 900 is ideal. Any score greater than 750 is considered a good CIBIL score and will help you avail credit facilities, like loans and credit cards.

Easy ways to keep a good credit score:

Pay your dues on time: Paying your credit card bills and EMIs on time is the easiest way to keep a good credit score.

Pay in full, not minimum due: Paying minimum dues results in the remaining amount being carried forward to the next billing cycle. This incurs interest and could drag your credit score down.

Restrict credit utilisation to 30%: Going over 30% of your max credit limit is considered high credit utilisation. This can adversely affect your credit score. Upgrade to a higher credit limit, if your expenses are high.

Reconsider closing old credit cards: It might save you some hassle but could shorten the time period of your credit history. Try to assess the impact before you do.

Diversify your credit portfolio: Having a mix of credit types, with varied repayment tenures, reflects well on your credit report. Different credit types include secured (such as home loan, auto loan) and unsecured loans (such as personal loan, credit cards).

Correct closure of credit lines: Loan and credit card settlements that require you to pay less than the due amount are not considered complete closure. It adversely affects your credit score

Check your Credit Report: You are entitled to one free credit report every 12 months(calendar year) from each credit bureau. Check for discrepancies and errors, and get them rectified

This article is authored by L&T Finance.

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