This article has been written by FinShiksha, a firm specializing in financial education for students who want to build a career in finance. They can be reached at https://finshiksha.com and @finshiksha on Twitter

“Payment nahin karoge toh aapka credit score kharab ho jaayega” (If you do not make the payment on time, your credit score will be affected).

Every one of us who has ever taken a loan or credit has heard this before. What this means is that once your credit score is lowered, if you apply for a loan or credit  – chances are you may not get a loan at favorable conditions or you may not get a loan at all.

The exact term used by financial institutions or banks is called “Creditworthiness”. This is what’s determined by your credit score. Credit scores in India are issued by bureaus like TransUnion CIBIL, Experian and Equifax. They get all your data on loans, bills, etc. and use it to determine your credit score. Banks use that data to decide whether to give you a loan or not, how much loan to give and the rate interest for the sanctioned loan. Thus, credit score is very important.

So, what affects your credit score?

Unstable Finances

Are you changing your credit card too often? If your answer is yes, then your credit score will be affected as companies do not like you to change cards or rollover loans too often. That’s a bad sign.

Never used Credit

“I do not use credit products or loans.” If the above statement holds true for you, then you will not have enough credit history to get you a good score. Not using any credit products will also hurt your credit history. You can start with a convenient service like ePayLater which offers you credit for 14 days.


Are you trying to get multiple credit cards or loans and have applied to multiple banks? Any sort of desperation to get a card or loan will hurt your credit score. 

Always on Debt

Do you always overuse your credit limit or OD/CC limit? If yes, then it’s time to stop. It is a bad habit to overdo anything and the same applies here. If you overuse your credit limit, it will hurt your credit score.

Now, what if you have been doing any of the above or just have a low credit score.

How then can you improve your credit score?

Always pay your EMIs or any dues on time

Late payment is a strict no-no. If you have any loans or dues make it a point to pay on time. If you have missed it previously, that’s fine. But make sure that you pay everything on time going forward.

Do not carry outstanding balances 

Credit facilities give you the option to carry forward the balance to next month. Avoid that as much as possible. Carrying a higher balance due for a long time sends a negative impression about your habits and hurts your credit score.

Having a lot of unsecured loans

You may have a requirement of loans for a variety of reasons. But for each reason suitable loans are available. Don’t just be dependent on personal loans and credit cards for all your needs. E.g. if you have a financial need for a business then use business credit or other such facilities. 

To sum it up:

  1. Try not to delay any payments
  2. Review loans regularly (even the joint loans where someone else is paying the EMIs)
  3. Do not carry excessive loan burden
  4. Do not be dependent only on unsecured loans

So go ahead and enjoy the benefits of various credit options available to you and have a healthy financial life!

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