1. What is a Credit Score?

A credit score is a numerical representation of your creditworthiness, typically ranging from 300 to 900 in India. It's used by lenders to evaluate the risk of lending to you. Higher scores indicate better credit health and increase your chances of loan approval at favorable terms.

2. How Credit Scores Are Calculated in India

The calculator uses the standard weighting factors for Indian credit bureaus like CIBIL:

Where:

• Payment History (35%): Your track record of paying bills on time
• Credit Utilization (30%): How much credit you're using compared to your limits
• Credit Age (15%): Length of your credit history
• Inquiries (10%): Number of recent credit applications
• Credit Mix (10%): Variety of credit types (cards, loans, etc.)

Note: The exact algorithm used by credit bureaus is proprietary, but this calculator approximates the key factors and their relative importance.

3. Importance of Credit Score

Details: A good credit score (750+) can help you get approved for loans and credit cards with lower interest rates and better terms. It's essential for major financial decisions like home loans, car loans, and sometimes even rental applications or job opportunities.

4. Using the Calculator

Tips:

• Payment History: Enter percentage of payments made on time (e.g., 95 for 95% on-time payments)
• Credit Utilization: Enter your current credit card balances divided by limits (e.g., 30 for 30% utilization)
• Credit Age: Enter the average age of your credit accounts in years
• Inquiries: Number of hard inquiries in the last year
• Credit Mix: Percentage score representing diversity of credit types

5. Frequently Asked Questions (FAQ)

Q1: What's a good credit score in India?
A: Scores above 750 are considered excellent, 700-749 are good, 650-699 are fair, and below 650 may face challenges getting credit.

Q2: How often should I check my credit score?
A: At least once a year, or before applying for major credit. You can get free reports annually from CIBIL, Experian, etc.

Q3: Does checking my score lower it?
A: Checking your own score (soft inquiry) doesn't affect it. Only lender-initiated hard inquiries have a small impact.

Q4: How can I improve my credit score?
A: Pay bills on time, keep credit utilization below 30%, maintain old accounts, limit new applications, and diversify credit types.

Q5: How long does negative information stay on my report?
A: Late payments typically stay for 3 years, while defaults may remain for up to 7 years.