The Credit Score Guide For 20-Somethings

By | September 17, 2019

The credit decisions that you make in your 20s can have a big impact on your financial future. So, here’s your complete Credit Score guide to help you get the most out of your credit. 

The Credit Score Guide For Every 20-Something

Your credit score plays an important role in your financial life and has a direct impact on whether or not you will be approved for any credit like a Personal Loan, Home Loan, Car Loan or Credit Card in the future, and at what interest rate.

Your twenties are crucial for building good financial habits to get an excellent Credit Score. So, before you take a leap into the world of credit, here’s your go-to Credit Score guide that explains what your score really means, why it’s important, how it’s calculated and much more.

So, without further ado, let’s get started!

What does my Credit Score really mean?

Your Credit Score is a three-digit number that is based on your credit history such as loan EMIs and Credit Card repayments. It ranges between 300 – 900 points. Usually, a score of 750 and above is considered good to get approved for good loan and Credit Card offers.

While your Credit Score is primarily used in determining loan or Credit Card approval and how much interest you will pay on the money you borrow, it is also considered an important factor when you apply for a job or buy an insurance policy. Your score is a direct reflection of your credit behaviour and is considered by both lenders and employers alike.

Additional Reading: Is Your Credit Score Good Enough To Get You Your Dream Job?

How is my Credit Score calculated?

Your Credit Score is calculated based on various factors like your credit and payment history, the number of active accounts like loan and EMI accounts you hold, credit utilisation ratio, etc.

In India, there are three major credit bureaus – Experian, Equifax, and CIBIL. Each bureau uses a slightly different scoring method and may provide different weightage to the above-mentioned factors while assessing your Credit Score.

Additional Reading: Here’s How Your Credit Score Is Calculated

Does checking my score lower it?

Absolutely not! When you request your own score from a credit bureau it goes as a soft inquiry and has no impact on your Credit Score. So, you can check your score as often as you like. In contrast, a hard inquiry occurs when a potential lender checks your credit report before lending credit.

Therefore, it’s advisable to avoid multiple credit inquiries in a short period of time that can make you look credit-hungry to the lenders and can put a dent on your score.

How can I improve my Credit Score

Here are a few things you can do to get your Credit Score in good shape:

  • Payment History: Your payment history can make or break your Credit Score. Any late or missed payment on your loan and Credit card can stay on your credit report for a very long time and lower your score drastically. So, clear all your existing dues and make a conscious effort to pay all your bills in time in the future.
  • Credit utilisation: It is the ratio of the outstanding balance on your Credit Card to your credit limit. It is advisable to keep your Credit Card balance below 30% of your credit limit to maintain a good Credit Score.
  • Reviewing your credit report regularly is important in maintaining a good score. Sometimes, you may find errors or discrepancies in your report like an error in account status, date of payment, etc. Should you find any errors, inform the credit bureau immediately to get it fixed.
  • Last, but not the least, always keep a healthy mix of secured and unsecured credit. This will show lenders that you are capable of handling multiple loans efficiently and thus make you eligible for more loan and card offers.

Now that you’re all set, go check your FREE Experian Credit Score in less than 3 minutes!

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