What is a Good Credit Score?

There are approximately 51,80,00,000 results for the query ‘What is a good credit score?’ The hype isn’t about the number of searches, but about the ultimate answer: what exactly is a good credit score?

A credit score is one of the reasons for numerous credit-based opportunities such as-

  • Credit card or loan applications are more likely to be approved
  • Higher negotiation power
  • Lower rate of interest
  • A borrower with a good credit score is given more preference
  • A great number of deals & discounts

While the above points highlight the importance of a good credit score and the intent behind it, it must be noted that there are some habits that restrict one to earn/retain/regain a good credit score.

What is a Good Credit Score?

A credit score of 750 to 900 is considered excellent. A good credit score assists banks and financial institutions in determining whether or not to lend money to a borrower. In contrast, a borrower with a low credit score misses out on numerous credit-based opportunities and benefits.

The table below defines the implications of various credit scores in order to provide an understanding of how a borrower’s credit score health looks and whether he/she needs to work harder to achieve a good credit score or not-

Credit ScoreCredit Score Health
300-549Poor credit score
Portrays irregular payment behaviour
It provides information on missed/delayed credit payments
Demonstrates a greater reliance on credit
Chances of becoming a defaulter
550-649Fair credit score
Shows irresponsible credit payment behaviour
Shows borrower’s multiple hard inquiry attempts (if any)
650-749Good credit score
Shows responsible behaviour when it comes to credit or loan EMI repayment
Eligible for credit and loans
Low risk of turning into a defaulter
Reasonable interest rate is charged against the loan, however, the borrower will not get a higher credit limit
750-900Excellent credit score
Little to no chance of becoming a defaulter
Highlights responsible credit repayment behaviour
Shows no default payments made
Error free credit report
Lower rate of interest
Higher negotiation power

Factors that Affect the Credit Score

There are numerous factors that influence a borrower’s credit score; however, it is the borrower’s responsibility to work continuously to improve it. The following are a few factors that affect credit scores and, if left unresolved, become a hindrance in the loan or credit card approval process:

  • Poor/bad repayment history
  • Higher use of credit utilization ratio
  • Numerous multiple hard inquiries within a particular period of time
  • Comments/error/issues in the credit report
  • Outstanding balance
  • Multiple partially settled payments

How to Improve Credit Score?

Just as there are numerous factors that have a negative impact on one’s credit score, there are numerous ways to improve one’s credit score. All a borrower needs to do is be strict and responsible about credit repayment. Some of the steps a borrower should take to maintain or regain a good credit score are as follows:

  • Make on-time credit payments
  • Ensure to use credit utilization ratio judiciously
  • Do not conduct multiple hard inquiries
  • Maintain a proper balance of secured and unsecured loans
  • Resolve any errors, issues, or comments on your credit report
  • Do not take comments in the credit report casually
  • Avoid partially settled payments
  • Don’t leave outstanding balances
  • Set timely reminders for payments
  • Most importantly, determine the amount of credit required and the number of expenses that can be managed

These are some of the methods a borrower can use to regain and maintain a good credit score. Furthermore, it is recommended that the credit report be thoroughly reviewed, preferably twice a year and that the credit score be checked on a regular basis.

How to Check Credit Score on Paytm?

There are numerous ways to check your credit score online. One such method is to use the Paytm mobile application to check one’s credit score. Paytm enables a borrower to quickly check his or her credit score in minutes without having to enter too many details. Here’s how to check your credit score using the Paytm mobile app:

  • Login to the Paytm mobile application
  • Navigate to ‘Loans and Credit Cards’
  • Click on ‘Free Credit Score’
  • Check your credit score for free!

Paytm allows borrowers to view their detailed credit report. The report provides a brief overview of the overall factors that may have influenced the credit score collectively. Additionally, you can also find various tips to improve your credit score.

Check Credit Score

FAQs
What is the significance of a credit score?
The credit score is significant because it is regarded as a major deciding factor in loan application approval.
What is an excellent credit score?
A credit score that ranges from 750-900 is considered an excellent credit score. An excellent credit score reflects a person’s responsible behaviour when it comes to repaying a loan or credit amount.
How long does it take to improve your credit score?
It can take months, if not years, to improve your credit score.
How does a credit card balance affect your credit score?
An outstanding credit balance lowers the credit score because it demonstrates the borrower’s inability to repay the credit amount on time.
What exactly is a bad credit score?
A bad credit score typically ranges from 300 to 549.
What is a fair credit score?
A fair credit score usually ranges from 550-649.
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