What Is a Credit Score? Meaning, Range & How It Works in India
Last updated:
Your Credit Score is a 3-digit number that credit bureaus calculate based on your repayment history, outstanding debt, and the age of your credit. This score is used by lenders to see if you qualify for financial services that they offer, and if so at what rate. Scores above 750 typically provide the best rates in India.
Credit Score in India: What each band means
The Credit Score range in India is between 300 and 900 with slight variations in terms of bands across the four Credit Bureaus. In general, the following table represents the consensus on Credit Scores and the bands.
| Score Range | Band | Approval Potential | Potential Impact on Rate |
|---|---|---|---|
| 800–900 | Excellent | Best terms with pre-approved offers common | The lowest potentially advertised rates would be offered here |
| 750–799 | Very Good | Chances of approval are very strong | The rates offered in this band would be considered competitive |
| 650–749 | Good | Approvals in this range would be likely but not assured | There would potentially be a small premium added in terms of higher interest rates |
| 550–649 | Fair | Some approvals may be possible, but the repayment terms would be stricter as well | The interest rates for this band would be noticeably higher |
| 300–549 | Poor | Most applications would be rejected in this band | The rates would be the highest possible, with the number of approvals lower in this band |
How is a Credit Score calculated?
There are five primary factors that determine what your credit score would be, but the same individual’s credit score may vary across all 4 approved Credit Bureaus in India. Each Credit Bureau has its own proprietary scoring mechanism, and lenders can use the scores from their preferred bureaus, along with their own internal parameters to decide on providing financial products to customers. The five factors are:
Timely repayments on all debt that you have taken on.
How much credit you have used from the amount available to you.
For what time have you held your loans or credit cards.
What kind of debt have you taken on, and how varied is it.
How often do you ask for new financial products from lenders.
While none of India’s credit bureaus have officially ever published the scoring for these factors, a global baseline exists via FICO - an American scoring and analytics company. It attributes a weightage of 35% towards payment history, 30% towards credit utilisation, 15% towards credit age, 10% towards credit mix and 10% towards new inquiries.
Which Credit Bureaus calculate your Credit Score in India?
Four Credit Bureaus are currently operational in India – TransUnion CIBIL, Equifax, Experian and CRIF High Mark. Each of these Credit Bureaus uses sophisticated proprietary algorithms to decide your credit score. As the mechanism used across them is different, your credit score may vary across the board. Your credit score also gets updated every 30-45 days across the four bureaus and the score updates aren’t synchronised - so it may again differ.
Why your Credit Score matters for Loans and Credit Cards
Loan approval across the country is heavily dependent on your credit score, as that serves as a measure of creditworthiness. With a higher Credit Score, you show the financial institutions that you have the ability to take on and service debt effectively. This leads to better repayment terms, lower interest rates and more confidence from them in you as they know you will repay what you borrow. Higher limits and better offers are also within reach with better Credit Scores.
How to check your Credit Score for free
You can check your Credit Score online via Piramal Finance for free and month-on-month to track progress. In addition, checking your credit score online counts as a soft inquiry and should not affect it. However, you only get access to a single free credit report per Credit Bureau every year as per the RBI. There are other ways to check your credit score as well. This can be done via the bureaus directly, through net-banking services from your bank, and certain fintech apps.
Frequently Asked Questions about Credit Scores
A credit score is a 3-digit number that is representative of your creditworthiness. It serves as the strongest indicator of your ability to take on and service debt when you borrow funds, or take on credit cards from financial institutions.
A good credit score may vary across Credit Bureaus, as their scoring algorithms are different across the board. However, in general a score of 750 is considered good, with a score above 800 putting you in the “excellent” category.
700 is in general considered a fair score across-the-board. This would mean you have access to financial products and services, but it may not be available at the best possible rates.
Yes, it is possible for your Credit Score to reach 800 and go potentially higher as well. However, it requires that you stay disciplined with the amount of debt you take on, and how you repay it.
Very few people would have a perfect Credit Score. Once your score has crossed the 800 mark, you should have access to the best offers anyway, and can slowly work towards 900.
Self-checks on your credit score do not automatically affect it negatively, as these are considered soft inquiries. When you apply for loans or credit cards, a check may be carried out by the financial institution and there may be a temporary drop in your score as this is considered a hard inquiry. However, it is always recommended that you check your score regularly so you can work on improving it and maintaining it over time.