A credit score is a numerical representation of an individual’s creditworthiness, essentially reflecting how likely they are to repay borrowed money based on their past credit behavior. It acts as a key indicator used by lenders, banks, financial institutions, and even landlords to assess the risk of lending money or extending credit to a person. A good credit score generally means the person has a history of repaying debts responsibly, while a poor credit score indicates potential risks, such as late payments, defaults, or high debt levels. In India, credit scores are primarily calculated by credit bureaus such as CIBIL (Credit Information Bureau India Limited), Experian, Equifax, and CRIF High Mark. These agencies gather data from banks, financial institutions, and other lenders about a person's borrowing and repayment history to generate the credit score. The most commonly referenced credit score in India is the CIBIL Score, which ranges between 300 and 900. A score closer to 900 signifies excellent credit behavior, making it easier to get loans or credit cards approved with favorable terms. How is a Credit Score Calculated? Credit scores are generated based on several factors that reflect financial behavior, including: Payment History: Whether loans and credit card bills were paid on time. Credit Utilization: The percentage of credit limit used relative to the total available credit. Length of Credit History: How long the individual has been using credit. Types of Credit: Mix of secured loans (like home loans) and unsecured loans (like personal loans). Recent Credit Inquiries: How many times credit applications have been made recently. Each of these factors is weighted differently, and their combined assessment results in the final credit score. Why is a Credit Score Important? 1. Loan Approvals: Banks and NBFCs rely heavily on credit scores to approve or reject loan applications. 2. Interest Rates: A higher credit score often translates to lower interest rates, saving money over the loan tenure. 3. Credit Card Eligibility: Credit scores influence credit card approvals and credit limits. 4. Rental Agreements: Some landlords check credit scores before renting out properties. 5. Employment: Certain employers, especially in financial sectors, may review credit scores during hiring. Maintaining a Good Credit Score To maintain or improve a credit score, individuals should ensure timely payments, avoid maxing out credit limits, avoid applying for too many loans or credit cards in a short span, and regularly check their credit reports for errors or fraudulent activities.

Dear Client, A credit score is a number that reflects your creditworthiness – or, how likely you are to pay back borrowed funds. A credit score is determined by systematic evaluation of your repayment history, credit card utilizations, loan amounts, and defaults. In India, CIBIL, Experian, and Equifax will base your credit score on a scale of 300 - 900. A higher score (usually above 750) reflects good credit health, and will allow you to borrow more easily and at lower rates of interest, while a low score might signal to lenders that they should treat you as a higher-risk client. I hope this answer helps. For any further queries, please do not hesitate to contact us. Thank you.