What’s a Credit Score?
This is a statistical number that is calculated based on your credit history and repayment habits. It can also be derived from other financial data collected by rating agencies from financial institutions. Your Credit Score is a measure of your creditworthiness. The rating agency collects this data based on a key or unique identification such as Permanent Account Number (PAN) – issued in India by the Income Tax Department or SSN in the USA. Different parameters may be used to determine the weight. Each agency will assign a different weightage. It generally ranges from 300 to 850 points.
The credit score check gives the lender an indication of the likelihood that the borrower will default if a loan or credit facility is granted to him/her. The chances of getting a loan at lower rates are higher if your Credit Score is higher. Before applying for credit or a loan, it is essential that you check your Credit Score. Credit scores below 600 are considered poor, and financial institutions will not lend to these individuals. You can improve your credit score by being financially disciplined. Creditworthiness can be seriously damaged by ignorance or small mistakes. You can improve your credit score and get lower credit rates by paying less attention to the little things.
You can improve your credit score by following these dos and don’ts.
Dos
1. Do not delay paying installments on loans that you have.
2. Pay your credit card bills on time. Use the ECS (Auto debit facility) to make sure you pay your credit card bills on time.
3. Prepay existing loans if possible. You can reduce interest by making a small extra payment above and beyond the due EMI or installments. It will also improve your credit score.
4. Good and long-lasting banking relationships with your banker will help you improve your credit score. It is possible to lower your credit score by changing your banker frequently, particularly if you are using business-related credit facilities.
5. You should also pay your utility bills on time, such as electricity, mobile, insurance premiums, municipal taxes, etc. These are not reported for credit score checks, but they can help you keep your finances in order.
Don’ts
1. Don’t take loans from multiple banks. Maximize your credit facility from only one or two banks. You might have one personal loan, two mortgage loans, and two car loans. This arrangement will lower your credit score. You can transfer all five of these loans to one or a maximum of two banks.
2. Rotate your credit card balances from one card to the next. You won’t be able to pay your credit card bills if you rotate the balance. This can seriously damage your creditworthiness.
3. Don’t overuse or use the credit card limit. If you exceed 90% of your credit limit frequently, contact the credit card issuer for an increase in your credit limit.
4. You should not cancel your existing credit cards just because you have a new one. Credit scores will improve if you have a longer credit history and make regular payments on your bills.
5. Don’t take too many credit cards from different banks. Keep at most 3-4 cards from the same bank. Your card company will increase your limit if you use these cards frequently and pay your bills on time.
6. Unless you are in an emergency, do not withdraw cash via ATM from your CREDIT Cards. Avoid frequent cash withdrawals from your credit card account. Instead, use Debit Cards that are linked to your savings account to withdraw cash.

To see your credit score sheet, make sure you do it once per year. If you notice any errors in your credit score sheet, please immediately notify the financial institution concerned and have the information updated with rating agencies. This is especially important if you plan to apply for a new loan/credit facility.