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India has more than 900 banks and non-banking financial institutions which can provide you with different kinds of loans in the time of need. So, how do these institutions check your creditworthiness? The answer is simple, by using your credit score.

Every lender checks your credit score as soon as you apply for a loan or any other form of credit. Therefore, a good credit score is important to get your loan request approved easily. Here, we will discuss everything you need to know about what affects your credit score.

What is a credit score?

A credit score is a 3-digit number that can range between 300 and 900. It is a summary of your credit history and a reflection of your creditworthiness.

A credit score above 750 is preferred by lenders since it is considered to be a good credit score. The higher your score, i.e., closer to 900, the better your chances of getting a loan or other form of credit easily.

Credit RatingWhat factors affect credit score?

Your credit score is calculated using a range of factors. Here, we will explain what impacts your credit score and the key factors that are considered.

Repayment History – Your repayment history is a reflection of how consistent you have been in making timely repayments of borrowed credit. If you’ve been regular in paying back your loan or credit card bills on time, your credit score will likely be in the acceptable range.

Credit Utilization – This is an indicator of how much credit you use from the available credit limit. The lesser credit you use, the higher your credit score. It is ideal to maintain a credit utilisation within 30%.

Credit Mix – A healthy credit mix that contains at least one secured loan with a long tenure (e.g., a home loan) and an unsecured loan (e.g., personal loan) will have a positive impact on your credit score.

Credit Age – This is the period starting from the first date that you borrowed credit till now. The longer your credit age, the better your credit score.

Credit RatingWhat affects credit score negatively?

Here are the top factors that may negatively affect your credit score:

Hard Enquiries : Whenever you make a loan application or apply for a new credit card, the bank or lender will source your credit information from a credit agency. This is termed as a hard enquiry or pull enquiry. When you make multiple loans or credit card applications, your credit score could be affected because of such hard enquiries.

Request for Higher Credit Limit : If you frequently request your lender to increase your credit limit, it can impact your credit score negatively. This is because every such request will lead the bank to ask for a credit report from a credit agency. This, in turn, can hit your credit score.

New Credit Accounts : If you’re constantly opening new credit accounts, it reflects that you are credit hungry and are unable to manage the available credit effectively. This could bring your credit score down as lenders will consider this a negative sign.

Why is a good credit score importantWhy is a good credit score important?

Whenever you apply for fresh credit, like a loan, your lender checks your score from credit bureaus. If your credit score is low, the chances of easily getting a loan will diminish severely.

One of the primary benefits of a good credit score is good deals on credit cards and better interest rates on loans. A high credit score is a reflection of good credit behaviour and lenders will view this as better chances of loan/credit recovery.

How Can You Maintain A Good Credit Score?How to improve your credit score?

If you have a poor credit score (below 700), you can use the following tips to improve the same:

  • Ensure that your loan repayments are made on time and be consistent with them. 
  • Check your credit score regularly. You can check the same and other basic information on your credit report by visiting CreditMantri.
  • Use the autopay option for EMI payments. 
  • Try to split the EMI or repayment amount into 2-3 parts and distribute the payment throughout the month.
  • Avoid multiple credit card applications. 
  • Maintain a low credit utilization ratio at all times. 
  • Retain your old credit accounts. This will help in increasing your credit history.
  • Use an unsecured loan only when you can’t do without it.


A good credit score will go a long way in ensuring easy availability of credit to support your financial needs. Consider all the factors that affect your credit score, positively and negatively. It will help you in getting a complete picture of your credit behaviour and pattern.

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1. What are two factors used to determine a credit score?

The two main factors that help in determining a credit score are:

  • Credit history
  • Repayment pattern

2. What gives you a bad credit score?

Here are some of the reasons why you may have a bad credit score:

  • Delayed or missed repayments on loans and credit cards
  • Multiple credit applications in a short duration
  • High credit utilisation

3. How do you get a negative credit score?

There are chances of getting a negative credit score if:

  • You have a bad credit history resulting from defaulting on payments
  • Uncleared dues
  • Declared bankruptcy

4. What factors have the biggest effect on your credit score?

Your credit score can be highly impacted by the following:

  • Repayment track record
  • Credit utilisation ratio
  • Credit mix of secured and unsecured loans
  • Number of credit card or loan applications
  • Length of credit history

5. What things can lower your credit score?

If you have no credit history, delayed repayments, pending dues, and multiple credit applications, your credit score can end up being lower.

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