Chapter 5: Understanding Your Credit Score

by Kasturi Jatkar


You have a magic number, each one of you. You may have heard of it. Maybe, checked it too. But do you really understand the magic behind Credit Score. We will break it down for you answering every question you ever had.

What is Credit Score?

Credit Score: It is a measure of your ability to return any loan or credit.

In other words, a credit score is intended to measure your credit-worthiness. It is a three-digit number ranging between 300-900, 900 being the highest. Which means something between 700-900 is a very good credit score.

Where to Find Your Credit Score?

The Credit Information Companies calculate the credit scores for anyone eligible. There are four credit score agencies in India, that will calculate your credit score - CIBIL TransUnion, Experian, Equifax, and High Mark. You can either make an inquiry directly from these companies, or from any financial organization, for free. You can check your Credit Score for free here. You can also visit Bajaj Finserv, HDFC Bank, Paisa Bazaar, etc. and get your credit score.

How is Credit Score Measured?

When you make a financial transaction, the financial organisation sends its details to all the four credit bureaus. This is a directive by the RBI to share all relevant details. The credit bureaus keep an update of all your financial proceedings. Then they process all the information to make your Credit Report.

CIBIL is the most popular agency, being the pioneer in India. It is often said that the Credit Score and CIBIL score are the same. But, your credit score from other agencies is equally correct and same as CIBIL score.

Is Credit Score Important?

We have been talking about credit score being the magical number. But is it really that important? Yes it is. And we have reasons to believe so.

Credit Score determines if you get a loan and at what rate of interest.

How a Good Credit Score Helps?

  • Getting loans gets easier, as compared to someone with a bad credit score.
  • Just like the loans, it is easier getting a credit card with a high credit score.
  • When you have a good credit score, and your timely repayment history, you can negotiate, to get a lower rate of interest.
  • The financial institutions are willing to raise your credit limits.
    In case you already have a poor Credit Score, yet you still apply for credit, every rejection will bring your Score further down.