Six points that determine your credit score and how to boost a low score

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New Delhi | Published: April 22, 2019 3:01:26 AM

If your credit score is low, take immediate steps to boost it as it will play a major role in deciding the future of your credit applications.

credit score, credit utilisation ratioCredit Utilisation Ratio (CUR) is the calculation (in percentage) of your total outstanding credit balance against the total credit limit across all your revolving accounts.

A good credit score (i.e., a 750+ score) would largely ensure your credit applications (for credit card, personal loan, home loan, car loan, etc.,) will get approved under favourable repayment terms (like with a lower interest rate).

Here are six things that actually determine your credit score:

Repayment behaviour

Your repayment history in terms of your existing credit lines plays the most crucial role in determining your credit score. Credit information companies factor in your repayment behaviour with both revolving loans (like a credit card) and instalment credit (like a home loan) while calculating your credit score. If you’ve been disciplined in all your repayments without missing a single payment deadline, it’s bound to have a positive impact on your credit score. In contrast, things like loan defaults and settlements, bankruptcy and late payment penalties will sink your score.

Age of credit lines

The longer you have stayed disciplined with your repayments, the better it is for your credit score. Start at least one new credit line and remain consistent with its repayments if you want to improve your credit score. Also, disciplined repayments won’t take years for your credit score to see a boost. It may start showing its positive effects earlier than you anticipated.

Credit Utilisation Ratio

Credit Utilisation Ratio (CUR) is the calculation (in percentage) of your total outstanding credit balance against the total credit limit across all your revolving accounts. And a CUR of less than 30% bodes extremely well with your credit score. Suppose you’ve two credit cards with Rs1 lakh credit limit each and your outstanding balance on both the cards stand at Rs 20,000 and Rs 10,000 respectively. That means your CUR is (Rs 30,000 /Rs 2 lakh x 100) 15%, something that’ll surely boost your credit score. On the other hand, if your total outstanding balance for both the cards is Rs 1 lakh, your CUR is 50%, which will reflect poorly while assessing your creditworthiness and will bring your credit score down.

Always ensure you never exceed the 30% CUR mark if you want a good credit score. If you’re dealing with snowballing credit card debt, work towards getting rid of those as soon as possible and avoid adding any other charges to your card(s) till your existing dues are fully cleared.

Credit mix

A diversified credit profile also contributes towards a high credit score, albeit with a limited impact. If you’ve successfully maintained and closed different types of credit lines (like a credit card account plus a personal loan and a car loan) over a long period of time, it shows you’re great in handling credit, something that’ll positively impact your credit score.

Number of credit applications

Many of us make the mistake of applying for multiple credit lines (like credit cards and personal loans) in quick succession. Multiple credit applications are perceived as credit desperation and have a negative impact on the credit score.


At times, a small error in filling in your correct PAN details while checking your credit score may lead to a faulty score. Always ensure you minutely check your credit report to ensure all the details (name, bank accounts, PAN number, etc.) are correct. More importantly, check that all your past credit-linked transactions (like repayments, interest payments, penalties, etc.,) have been correctly reported by your lender. Any erroneous or incomplete entry from the bank’s side can also hamper your credit score.
If your credit score is low, you must take immediate steps to boost it up as it’ll play a major role in deciding the future of your credit applications. Steps like setting a reminder to ensure you never miss a payment deadline, going on a financial diet to cut down wasteful credit card spends, working towards expanding your income pool to help clear off debt faster, and correcting errors will go a long way in improving your credit score.

The writer is CEO,

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