• Gokul Harikumar

Credit Scores, Explained

Updated: Nov 21, 2019

At some point in our life, you must have heard of "CIBIL Score". We all know it is used to give us loans. But how does it work and how to improve it?

Before we go there, let's get some details right. In India, the term "CIBIL Score" is used as a proxy for credit score. Credit Score is an indicator of how "credit-worthy" you are, so your credit score is evaluated before you get a loan.

These Credit Scores are generated by organizations called Credit Bureaus. In India, we have four major Credit Bureaus:

  1. CIBIL

  2. Experian

  3. Equifax

  4. Highland

Out of the four, CIBIL is the oldest in India and the most popular. So people refer to credit score as their "CIBIL Score". In reality, the company giving you a loan could use data from any bureau.

These Credit Bureaus have something called the Credit Report of the person. This credit report contains her personal information, loans taken to date, payment history, etc.

They then generate a "Credit Score" based on the credit report. This score is used by lending companies to give you loans.

Typically, a score greater than 700 is considered a good score across all bureaus.

How does it go down?

Credit Scores get reduced due to:

  1. Late repayment of Loans and Credit Card Bills

  2. Reaching Credit Card limit frequently

  3. Multiple enquiries for Loan/Credit Card in a short period.

How to improve your credit score?

  1. Ensure that you repay your EMIs and Credit Card bills on time.

  2. Try not to utilize greater than 30% of your credit limit per card. If required have multiple cards to ensure you stay within 30% utilization of each card.


A good credit score helps you get a loan at low rates of interest. So it becomes very important for you to ensure that your credit history is clean.

Use your credit card wisely and pay your dues on time. The rest will take care of itself.

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