What Is a Good Credit Score, and Why Does it Matter?

Have you ever taken a loan or want to take one in the future? Then you need to have a good credit score. 

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A good credit score is crucial not just for loans, but also for obtaining credit cards and other financial products. 

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This leads to the question: What is a good credit score? In this blog, we look at the different credit score ranges, why they matter, and how you can check and improve them.

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What Is a Credit Score?

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A credit score is a 3-digit number that ranges between 300 and 900. It is a measure of your creditworthiness. Simply put, it shows how easily you can get a loan. 

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Lenders use it to judge how risky it is to lend to someone. The higher the score, the lower the risk of lending to a person.

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Why Is Credit Score Important?

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At some point in life, most people will need to take out a loan and many will take out more than one. 

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When you go to a financial institution to seek credit, they will judge the chances of you repaying it. 

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The way they do it is by looking at your credit score. Here’s how understanding what is a good credit score and how it can impact your chances of getting a loan:

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• Approval of Loan:  If you have a high credit score, your chances of securing a loan increase. Lenders will be confident in your abilities to repay a loan, thus underlining the importance of a good credit score. 

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• Interest Rate: Interest rates charged on a loan are directly related to a borrower's credit score. A good credit score will make a lender trust you more, thus leading to a lower interest rate on the loan.

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• Terms and Conditions of the Loan: Every loan comes with a set of terms and conditions. 

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If you have a good credit score, such as one over 650, you could get better conditions for loan repayment, such as a longer duration for repaying the loan and reduced down payments.

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• Amount of Loan: The greater a person’s credit score, the more will be the chances of securing a higher loan amount. 

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On the other hand, if a person has a lower credit score, their chances of securing a higher loan amount decrease.

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‍What Is the Range of Credit Scores in India?

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‍In this section, we will discuss the good credit score range in India. Here’s a breakdown of the ranges: 

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• 750 to 900: If you are wondering what is a good credit score in India, this is the level you need to target. It is regarded as a top-notch credit score.

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If you have a credit score in this range, you can get funding at much lower interest rates. At this level, your chances of getting a loan become very high.

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• 700 to 749: This range indicates that you have a strong credit history. With a score in this range, you are likely to have no trouble securing a loan.

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• 650 to 699: It is a fair credit score. With such a score, you might be able to secure loans and credit cards, but at less favourable rates.

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• 600 to 649: This is a poor credit score. At this level, you will struggle to secure credit. Even if you secure a loan, the interest rates will be higher and the conditions will be strict.

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• Below 600: It is a risky credit profile and can lead to loan rejections and highly unfavourable terms.

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‍How to Improve My Credit Score?

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‍It is important to improve your credit score for the sake of your future. But for that, you need to take some steps over the long run. We have described those steps below:

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• Paying Bills on Time: This one is extremely important. From credit card payments to loan EMIs, it is important to always pay your bills on time. You can also set up automatic payments to ensure you don’t miss any due dates. 

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• Reduce Your Credit Usage: For the best results, keep your balances low. Try to not spend more than 30% of your credit limit. It conveys to the lenders that you are financially responsible. 

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• Track Credit Report Regularly: You must check your credit report regularly and ensure it does not have any mistakes. If required, you can dispute any errors you spot. 

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• Build Credit History: If your credit history is limited, a secured credit card can be a great option. By using it wisely and making timely payments, you can begin to build a positive credit record.

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• Build a Good Credit Mix: Creating a good combination of secured and unsecured credit helps in building a good credit score in India.

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‍How to Check Your Credit Score?

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‍You can visit Jar to check your credit score. All you need to do is click on ‘Get Credit Score’,  enter your mobile number, check the box to allow Jar to access your credit score and click on ‘Next’. 

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We will send a text message to your number. Once you enter the required credentials, you can access your credit score.

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‍The Bottom Line

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‍From buying a car or a house to starting a business, there are several reasons why you may take a loan. But to actually get it, the lending institution must approve your loan application. That is why you need to know what is a good credit score.

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There are several factors that impact your credit score. It includes your payment history, credit utilisation, and length of your credit history. 

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‍Want to check your credit score? Download the Jar app now to access your credit score instantly!

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‍Frequently Asked Questions

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1. Which are the main credit bureaus in India?

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The 4 main credit bureaus in India are TransUnion CIBIL, CRIF High Mark, Equifax, and Experian.

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2. How much credit score is good?

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A good credit score in India is between 750 and 900. A score between 650 and 749 is good enough as well but can lead to strict conditions in some cases.

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3. How to improve my credit score?

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Paying your bills and EMIs on time, regularly checking your credit reports and lowering credit utilisation are some of the ways to improve your credit score.

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4. How does credit score impact loan eligibility?

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A high credit score ensures that you can get a loan of a high amount with good conditions such as a lower interest rate and longer repayment period. 

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As your credit score falls, your capacity to borrow decreases, and the chance of getting loans with stricter conditions increases.