How Your Credit Score Impacts Your Financial Future?

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Despite the fact that Credit Bureaus have been operating in India for over 15 years, a poll reveals that more than 80% of the public is unaware of their existence and that only a small percentage of them are familiar with their credit reports. Also poorly known is the value of credit reports. A solid credit score, which is essential if one wants to be able to access organised sector borrowing, can only be achieved by having a credit-savvy attitude. Additionally, having Good Credit Guarantees that one is not just financially sound but also that they are not Over-Leveraged. It could also affect your chances of getting a Job in other ways.

Variables Influence your Credit Score

1. Repayment History: The credit bureaus monitor your monthly loan, credit card, and other credit repayments.

2. Credit Utilization Ratio: This is the proportion of your available credit limit that has been used. You may figure it out by dividing your whole balance of debt by the total amount of your credit limit.

3. Credit History: Over the years, a solid credit history can help you raise your credit score a few points.

4. Credit Account Types: Managing various loan types, such as secured and unsecured loans, can improve your credit score.

5. Credit Enquiries: Your credit score is also severely impacted by the quantity of inquiries you or lenders make regarding your creditworthiness.

What Improves and Decreases a Credit Score

Here is what each part of you means:

  • Payment History – Your history of timely debt repayment is shown in your payment history. Your payments on credit cards, retail accounts, instalment loans (including auto or student loans), finance business accounts, and mortgages are all included in this component. Also taken into account are open documents and reports describing things like bankruptcies, foreclosures, lawsuits, liens, judgements, and wage garnishments. Your score is impacted by a history of timely payments of at least the minimum amount required. Missed or late payments lower your rating.
  • Duration of Credit – How long you have had and used credit is referred to as history. Because lenders have a higher chance of seeing your payback record, the longer you have demonstrated appropriate credit management, the better your score will be. If you have consistently made payments on time, you will seem very excellent in this regard.
  • The “Mix” of Credit – you have access to, such as credit cards, retail accounts, instalment loans, finance business accounts, and mortgage loans, is referred to as “kind of credit.” Not every sort of account is required. Instead, this component looks at the many sorts of credit you have and how responsibly you utilise it. For instance, using a credit card to buy a yacht can lower your rating.
  • Amounts Owed or Credit Utilization – displays how much debt you have and helps determine if you can pay it off. Your credit score will suffer if you have a lot of unpaid bills or are almost at the “limit” on your credit cards. Never go beyond 30% of a credit card’s available credit, is a decent rule of thumb. It is seen favourably to repay an instalment loan.

Increase your Credit Score to safeguard your Financial Future

  • Get a copy of your credit report as soon as you can.
  • Make sure all of your account information is properly documented.
  • Notify the credit bureaus right once if there is any mistakes, no matter how big or little.
  • Always keep your credit card usage to no more than 30%.
  • Combine your numerous credit packages.
  • Determine to pay off your bills each month with a predetermined amount.
  • Pay down your monthly utility payments as soon as possible.
  • Avoid impulsive credit purchases.

How will your Credit Score impact your Future Finances?

1. Loan Approvals in the Future

How creditworthy you are to potential lenders will depend on your credit score. Any lender you apply to for a new loan will examine your credit record as soon as you do. Your loan application will be considered for the following round if your credit score is higher than the lender’s threshold limit. You are a low-risk borrower if your credit score is between good and outstanding. However, if you don’t have the requisite credit score, the lender will automatically reject your application.

2. Possible Savings

Your dues being greater than your income is indicated by a poor credit score. It suggests that you should be more aware of your spending habits and develop financial discipline. You may borrow additional money if you are unable to meet the monthly payments; this creates a vicious cycle that may eventually lead to debt trapping. You won’t be able to save any money in this circumstance for your financial objectives in the future. While a high credit score indicates that you pay your debts on time, avoiding late fees, and are therefore eligible for loans with favourable terms. Saving money may be used to invest in a variety of financial opportunities, which will aid in your long-term goal of building wealth.

3. Faster Loan Processing

If you have a decent to exceptional credit score, lenders will see your consumer profile favourably, which will speed up the approval process for your loan application. In contrast, if your credit score is below par, lenders will need to take other things into account when analysing the risk in your profile, which might cause the loan process to be delayed. Additionally, if you have a high credit score, you have a better chance of getting pre-approved and an immediate loan offer.

4. Ease of Mind

You may be certain that you are practising financial discipline and effectively managing your finances when you know you are making your monthly payments and credit card bills on time. You’ll feel more at ease about your money as a result of this. While being unable to pay your fees and dues on time can put you under financial stress, which will harm your relationships and health.

5. Employment Qualifications

Many businesses look into the credit history of the applicants they have chosen to hire. This screening is only carried out for jobs that need frequent interaction with cash. To avoid any potential issues in the future, job credit checks are required. Therefore, the company may see your profile as high-risk if your credit history indicates missing and delayed payments.

6. Your Mortgage Rates Will Be Affected

Maintaining a high score demonstrates your propensity for meeting your financial responsibilities, even past-due payments, on time. This reassures lenders that they will receive their money back without incident and encourages them to lend to you. As a result, your loan will have a lower interest rate.

Due to the risks associated with potential future non-payment or delayed payments, a low credit score will, however, result in a higher rate. Massive sums of money in interest that could have been avoided are accrued due to the difference between 5% and 5.5%. You’ll pay astronomical prices if they accept you. You should make significant financial savings by taking the necessary steps to improve your score.

7. Refinancing Qualifications

If you currently have a loan and need a top-up loan or want to refinance it, the lender will only take your application into consideration if you have made all of your monthly instalments on time. When your credit score is poor, lenders typically avoid refinancing loans or offering top-up loans.

8. It’ll Impact Your Retirement

By paying high rates and premiums, one might wind up shelling out unimaginable sums of money over time. This sum of money was available for retirement expenses but might have been invested instead.

Sadly, many retirees will be forced to rely on their children or other family members to survive. The clear need to change your way of living will lower your quality of life. All pecuniary judgments involving you must be forfeited.


A Credit Score is a crucial factor in determining your reputation in relation to several parts of your financial future. It is advised to raise or maintain your credit score by promptly repaying your EMIs, maintaining the credit utilisation ratio, and having a healthy mix of various loan kinds, among other things, in order to ensure a secure financial future, access to loans, and employment eligibility.