Have you ever wondered why your loan or credit card application gets rejected, or why the interest rate on your personal or home loan is higher than the market average?
Well, the answer often lies in something most people underestimate — your credit score.
Let’s find out the goods and the bads of how we’ve all been taught about credit scores, and uncover the real truth behind what helps — and hurts — your financial profile.
But Why Do We Need Credit Scores in the First Place?
Your credit score is like a financial trust rating — it helps lenders quickly assess how likely you are to repay a loan or credit card bill on time.
So, if you need a loan or a credit card, you must possess a credit score so that your creditworthiness can be assessed by lenders or banks.
⚠️ Exception: This may not apply if you're opting for FD-backed (secured) loans or credit cards, where the fixed deposit acts as collateral.
💡 Quick Note: In India, credit scores typically range from 300 to 900, with 900 being the best. Here’s a general breakdown:
- 300–549: Poor – Likely to face rejections
- 550–649: Fair – Higher interest rates or limited approvals
- 650–749: Good – Decent approval chances with average interest
- 750–900: Excellent – Easy approvals and best interest rates
Most lenders prefer scores above 750 for unsecured credit like personal loans and credit cards.
Every Action Counts:
Every action matters when it comes to building or maintaining your credit score.
Banks and lenders review your credit history to evaluate your behavior with loans and credit, especially unsecured products like Credit Cards and Personal Loans.
Your score not only affects loan approval chances but also determines the interest rate based on your risk profile.
A low credit score signals a risky borrower, which can lead to rejections or higher rates.
How to Improve & Maintain Your Credit Score (with Goods, Bads & Importance)
1. Always Pay Bills on Time
Weightage: ~30% impact on your credit score
Goods:
- Builds a strong repayment track record
- Boosts creditworthiness for future loans
- Helps you qualify for low-interest credit offers
Bads:
- Missed or delayed payments stay on your credit report for years
- Leads to late fees, penalties, and reduced score
- May result in loan/card rejections
In reality: You need efficient payment reminders and smart strategies to stay on top of multiple monthly bills without missing a due date. Using tools or automated systems can help you track and avoid late payments.
2. Keep Credit Utilization Below 30%
Weightage: ~25% impact
Goods:
- Shows you’re not credit-dependent
- Keeps your score high even without full repayment history
- Increases chances for higher credit limits in future
Bads:
- High utilization signals financial stress
- May lower your score even if bills are paid on time
- Can trigger bank suspicion and reduce approval odds
In reality: Managing a 30% credit utilization ratio often means juggling multiple credit cards or loans, which can be hard to track and maintain. You might feel pressured to hold multiple credit cards or loans to stay under the 30% limit.
3. Avoid the “Minimum Due” Trap
Weightage: ~10%
Goods:
- Prevents interest from piling up
- Keeps your outstanding balance low
- Maintains positive payment history
Bads:
- Paying just the minimum leads to high interest costs
- Can make you fall into a debt cycle
- Lenders see this as poor financial behavior
In reality: The “minimum due” looks convenient but can silently trap you in long-term debt. It’s essential to plan payments beyond the minimum to save on interest.
4. Maintain a Healthy Credit Mix
Weightage: ~10%
Goods:
- Balanced mix shows financial maturity
- Secured + unsecured credit builds stronger profile
- Boosts score with diverse credit history
Bads:
- Relying only on unsecured loans (like credit cards) may seem risky
- Too many unsecured loans can trigger rejections
- Lack of variety may lower credit score growth
In reality: Building a healthy mix of secured and unsecured credit can be a challenge, especially if you're starting with just a few credit lines. Make sure to monitor and diversify over time.
5. Keep Old Credit Accounts Active
Weightage: ~10%
Goods:
- Longer credit history strengthens your score
- Reflects long-term relationship with credit
- Shows stable usage patterns
Bads:
- Closing old cards can lower your average credit age
- May reduce total credit limit and spike utilization
- Can hurt your score even if you’ve never missed payments
In reality: You may feel tempted to close old accounts, especially if you’re not using them, but doing so can negatively impact your score by reducing your credit history and limit. Keep them open but unused to maintain a positive profile.
6. Check Credit Reports Regularly
Weightage: ~5%
Goods:
- Helps you catch errors or fraud early
- You can raise disputes and fix issues before applying for credit
- Keeps you aware of your credit health
Bads:
- Ignoring reports may let issues go unnoticed
- Errors like incorrect defaults can harm your score
- Missed opportunities to improve your profile
In reality: Regularly checking credit reports can uncover unnoticed mistakes or fraud, but it can also be overwhelming with multiple reports across bureaus. Use apps or services that notify you of changes.
7. Don’t Apply for Too Much Credit at Once
Weightage: ~5%
Goods:
- Fewer hard inquiries = higher score
- Lenders see you as stable, not desperate
- Helps you get better offers when you really need credit
Bads:
- Each loan/credit card application triggers a hard inquiry
- Too many inquiries drop your score
- Looks like you're credit-hungry or financially unstable
In reality: It’s tempting to apply for multiple credit lines at once, but each inquiry hurts your score. Limit applications to necessary times, and space them out to minimize impact.
8. Start Small if You’re New to Credit
Weightage: ~5%
Goods:
- Easy to manage and build initial score
- FD-backed cards are great for beginners
- Builds trust without major risk
Bads:
- Skipping this can delay credit profile building
- Jumping straight into high-limit credit can be risky
- May miss out on score growth in early years
In reality: For new users, starting small is key. FD-backed credit cards can be a great option to build your score without high risks. But don’t jump into large limits too quickly to avoid potential financial strain.
A Good Credit Score Isn’t a Guarantee: Why Approval Is Not Certain
In some cases, the same issuer or bank offers multiple credit cards — including co‑branded ones like HDFC Swiggy Credit Card or Uni Yes Bank Credit Card. In the fine print, you’ll often find clauses excluding existing cardholders from applying for new or co‑branded products.
For example, you’re not eligible for the Yes Bank Uni Credit Card if you already hold any Yes Bank credit card. Refer to the fine print.
Ready to Stop Worrying About Fine Print?
If you’re done navigating confusing eligibility clauses and want to stay on top of your credit profile and score, Join CreJik’s waitlist today.
Stay tuned for upcoming products and expert blogs designed to make you financially worry‑proof.
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