Blog /Advice
What Is a Credit Score and Why Does It Matter?
May 28, 2025
When it comes to borrowing money or managing your financial health, few things are as important as your credit score. Yet, many people still wonder: What is a credit score, how does it work, and why does it play such a critical role in loan approvals and financial planning?
In this article, we’ll break down the credit score meaning, why it matters, how it’s calculated, and how it impacts your ability to get loans, credit cards, or even better interest rates.
What Is a Credit Score?
A three-digit numerical representation of your creditworthiness is called a credit score. It assists lenders in determining your likelihood of repaying loans. This score is derived from your credit report, which includes your repayment track record, outstanding loans, the age of your credit accounts, and credit utilization.
Most credit scores in India range between 300 to 900. A higher score indicates better creditworthiness.
Credit Score Range Explained
Here’s a quick look at how the credit score range is generally interpreted:
- 300 – 579:Poor – high risk for lender
- 580 – 669: Fair – may qualify with stricter terms
- 670 – 749: Good – decent chance of loan approval
- 750 – 900: Excellent – ideal range for best loan terms
If you are planning to apply for an instant personal loan online , a score above 750 significantly improves your chances of instant approval and competitive rates.
Why Does Your Credit Score Matter?
- 1. Loan Approvals and Limits
Whether you're applying for a credit card, home loan, or personal loan, the approval process is heavily influenced by your credit score. Lenders use it to evaluate your reliability as a borrower.
- 2. Interest Rates
A higher credit score often translates to a lower personal loan interest rate. This is because lenders consider you less risky. Over time, lower interest means significant savings.
- 3. Credit Limit
Banks and NBFCs use your score to determine the amount you can borrow. A good score can lead to higher limits on your credit card or a better offer on a personal loan app.
- 4. Faster Processing
With a strong score, your loan journey becomes smoother. Many digital lenders now offer instant personal loan approvals based on pre-verified credit profiles.
How Is a Credit Score Calculated?
Numerous factors influence the credit score, such as:
- Payment history (35%): Have you paid EMIs and credit card bills on time?
- Credit utilization (30%): What percentage of your credit limit are you currently utilizing?
- Credit history length (15%): How long have you had active credit?
- Credit mix (10%): Are your debts a mix of unsecured and secured?
- New credit (10%): Have you applied for new credit recently?
Knowing this breakdown helps when you take actions to maintain or raise a good credit score.
How to Check Your Credit Score
You can avail a free credit score check through credit bureaus like CIBIL, Experian, CRIF High Mark, and Equifax. These institutions also offer a free credit score report every year.
Using these services allows you to monitor your score, spot discrepancies in your credit report, and take corrective action if needed.
Some financial platforms even let you view your score monthly. For example, Kissht, a digital lending platform, allows users to track their credit performance easily.
How Your Credit Score Affects a Personal Loan
When you apply for a personal loan, the lender first pulls your credit report. A strong score not only enhances your eligibility but can also lead to instant loan approval.
Use a personal loan EMI calculator to estimate your monthly installment based on the expected loan amount, tenure, and personal loan interest rate. This helps you plan better and avoid overborrowing.
Remember: A poor credit score might result in your loan application being rejected or approved at a higher interest rate.
Tips to Improve Your Credit Score
1.Pay EMIs and bills on time
2.Pay EMIs and bills on time
3.Limit your credit utilization to below 30%
4.Don't make multiple loan inquiries in a short time
5.Keep your secured and unsecured credit in balance
6.Check your free credit score report for errors periodicallyCan Kissht Help?
Yes. Kissht offers a user-friendly digital platform for those seeking instant personal loan online access. With the Kissht app, you can not only apply for loans but also track your credit score, get EMI reminders, and view your repayment history. It's an easy way to stay financially disciplined and loan-ready at all times.
Conclusion
Understanding what a credit score is and how it impacts your financial life is essential in today’s digital-first credit ecosystem. Whether you’re planning to get a personal loan, finance a big purchase, or apply for a credit card, your score holds the key.
By keeping track of your credit report, using a personal loan EMI calculator to budget wisely, and staying consistent with payments, you will be well on your way to establishing a strong financial foundation.
And if you're looking for a modern tool to manage your loans and track your score, the Kissht app is a handy option worth exploring.
FAQs
1. I want a personal loan, what is a good credit score?
A score of 750 or more is typically considered a good credit score for personal loan eligibility. It improves your chances of approval and may get you better terms. However, different lenders have different criteria, so even a score in the 700–749 range may be acceptable.
2.How can I get a free credit score check?
You can avail a free credit score check once a year through official credit bureaus like CIBIL. Additionally, financial apps like Kissht allow you to track your credit score regularly without charge.
3. Can I get a loan if I have a low credit score?
Yes, but it may be challenging. If your credit score is below average, you may still qualify for certain loans but at a higher interest rate. It’s advisable to work on improving your credit history before applying. Some digital lenders offer loans based on alternative credit evaluations.