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What Is a Credit Score? How It Works and Why It Matters
Learn what a credit score is, how it is calculated, why it matters when applying for credit, and how to check your credit score online.
Improving your financial health starts with understanding your credit score. Whether you're planning to apply for a personal loan, home loan, business loan or credit card, lenders often review your credit score to assess how responsibly you've managed credit in the past. A healthy credit score can strengthen your overall credit profile, although lenders also consider factors such as your income, repayment capacity and their internal credit policies.
Your credit score is generated by licensed credit bureaus based on information in your credit report. In India, credit bureaus such as Experian, CIBIL, Equifax and CRIF High Mark calculate credit scores using their own scoring models. As a result, your score may vary slightly across bureaus, but each score provides an indication of your creditworthiness.
In summary
- A credit score is a three-digit number that reflects your creditworthiness.
- Credit bureaus, including Experian, generate credit scores using information from your credit report.
- Your repayment history, credit utilisation and borrowing behaviour influence your credit score.
- Lenders may use your credit score along with other eligibility factors while evaluating loan applications.
- You can check your credit score online to monitor your credit health.
What is a credit score?
If you are wondering what is credit score, it is a three-digit number that reflects your creditworthiness based on your borrowing and repayment history. It is calculated using information from your credit report, including your loan repayments, credit card usage, outstanding balances, credit utilisation and recent credit enquiries.
In simple terms, your credit score helps lenders understand how responsibly you have managed credit in the past. When you apply for a loan or credit card, lenders may review your credit score as part of their assessment. However, your credit score is only one factor they consider. They also evaluate your income, repayment capacity, existing financial obligations and their internal lending policies before making a lending decision.
The table below shows how credit scores are generally interpreted.
| Credit score | What it generally indicates |
|---|---|
| 750 and above | Strong credit profile |
| 700–749 | Good credit profile |
| 650–699 | Fair credit profile |
| Below 650 | May require improvement |
Did you know?
Your credit score changes over time as lenders update your repayment information with credit bureaus. Responsible borrowing habits can help strengthen your credit profile gradually.
What is an Experian credit score?
An Experian credit score is a credit score generated by Experian, one of India's licensed credit bureaus. Like other credit bureaus, Experian collects credit information shared by banks, NBFCs and other financial institutions to prepare your credit report and calculate your credit score.
Although the scoring methodology differs slightly across credit bureaus, the purpose remains the same - to help lenders understand your creditworthiness based on your borrowing history and repayment behaviour.
How is a credit score calculated?
Your credit score is calculated using information from your credit report. While each credit bureau, including Experian, follows its own scoring methodology, they generally consider similar aspects of your credit behaviour. This helps lenders understand how responsibly you have managed credit over time.
The following factors commonly influence your credit score:
| Factor | Why it matters |
|---|---|
| Repayment history | Paying EMIs and credit card bills on time reflects responsible borrowing behaviour. |
| Credit utilisation | Using a lower percentage of your available credit limit indicates prudent credit management. |
| Credit history length | A longer credit history provides lenders with more information about your repayment behaviour. |
| Credit mix | Responsibly managing different types of credit, such as secured and unsecured loans, contributes to your credit profile. |
| Recent credit enquiries | Applying for multiple loans or credit cards within a short period may result in several hard enquiries. |
While no single factor determines your credit score, maintaining healthy credit habits across all these areas can contribute to a stronger credit profile over time.
What affects your credit score?
Your credit score changes as lenders continue to update your repayment information with credit bureaus. Positive financial habits can gradually improve your score, while missed payments or excessive borrowing may have the opposite effect.
| Habits that can strengthen your credit score | Habits that may lower your credit score |
|---|---|
| Pay EMIs and credit card bills on or before the due date. | Miss EMI or credit card payments. |
| Maintain a low credit utilisation ratio. | Frequently use most of your available credit limit. |
| Keep older credit accounts active and in good standing. | Apply for multiple loans or credit cards within a short period. |
| Review your credit report regularly to identify inaccuracies. | Default on loans or allow dues to remain unpaid for an extended period. |
Building a healthy credit score usually requires consistency rather than quick fixes. Responsible borrowing and timely repayments over time have a greater impact than any single action.
Why is your credit score important?
Your credit score gives lenders a quick snapshot of your borrowing behaviour and repayment history. Although it is not the only factor considered during a loan assessment, it helps lenders evaluate the level of credit risk associated with your application.
A healthy credit score may help you:
- Strengthen your loan or credit card application.
- Improve your access to suitable credit options.
- Demonstrate responsible credit management.
- Build a stronger overall credit profile.
Remember that lenders also consider factors such as your income, existing financial obligations, employment profile and repayment capacity before making a lending decision.
Pro Tip: A good credit score is built through consistent financial discipline. Paying your dues on time and using credit responsibly can help maintain a healthy credit profile over the long term.
How to check your credit score
Knowing your credit score before applying for a loan or credit card can help you understand your current credit profile and identify any issues that may need attention. Regularly checking your credit score also allows you to monitor changes in your credit health and take corrective action, if required.
If you're wondering how to check your credit score, Bajaj Finance allows you to access your credit report through a simple online process.
Step 1: Visit the Credit Pulse Report page
Go to the Bajaj Finance Credit Pulse Report page and select the option to check your credit score.
Step 2: Verify your mobile number
Enter your registered mobile number and complete OTP verification.
Step 3: Enter your details
Provide your name, PAN, date of birth, email ID and PIN code.
Step 4: View your credit score
Once your details are verified, your latest credit score is displayed instantly.
Step 5: Review your Credit Pulse Report
Review your repayment history, active credit accounts and recent credit enquiries to better understand your overall credit profile.
Checking your own credit score is generally treated as a soft enquiry, so it does not reduce your credit score.
Why should you monitor your credit score regularly?
Your credit score is not a one-time number, it changes as lenders update your repayment information with credit bureaus. Reviewing it periodically helps you stay informed about your credit health and prepares you for future borrowing needs.
Regular credit score checks can help you:
- Track changes in your credit profile.
- Identify reporting errors or outdated information.
- Detect unauthorised credit activity.
- Understand the impact of your repayment behaviour.
- Prepare before applying for a loan or credit card.
If you notice incorrect information in your credit report, you can raise a dispute with the relevant credit bureau to have it verified and corrected.
Making informed borrowing decisions
Your credit score is an important indicator of your creditworthiness, but it is only one part of your overall financial profile. Maintaining timely repayments, using credit responsibly and reviewing your credit report regularly can help you build and maintain a healthy credit score over time.
Before applying for a loan or credit card, it's a good idea to check your credit score and understand your current credit profile. Doing so can help you identify areas for improvement and make more informed borrowing decisions.
Note to the Reader: This article is part of Hindustan Times' promotional consumer connect initiative and is independently created by the brand. Hindustan Times assumes no editorial responsibility for the content.
The content may be for information and awareness purposes and does not constitute any financial advice.
