What is the purpose of a credit score?
A credit score is a three-digit number given by credit rating agencies. It helps lenders decide how likely you are to repay loans or credit card bills.
In India, it can range from 300 (poor) to 900 (excellent). Lenders look at this score first to figure out if you are a risky borrower or not.
Why does it matter? A higher score means faster loan approvals, lower interest rates, and access to better credit cards. On the other hand, a low score can lead to higher interest costs, loan rejections, or even difficulty getting simple things such as a mobile phone EMI.
Here is how you can keep a good credit score with some simple tips:
- Make sure to pay your EMIs and credit card bills on or before time so that you never miss a due date.
- Try not to use too much of your credit limit, and keeping your usage below 30% is ideal.
- Avoid applying for several loans or credit cards in a short span, as it can hurt your score.
- Check your credit report regularly and raise a dispute if you find any mistakes. Otherwise, it may lead to future hassles for you.
If you do not have a credit score right now and you want to get a credit card, then the only option is to get a secured credit card.
Banks issue FD-backed credit cards where you get 80% - 90% of your deposit amount as a credit limit and also earn interest on it.