Your credit score is a three-digit number that can significantly impact your financial life. Understanding how it works is the first step to mastering it.
What Is a Credit Score?
A credit score (typically 300-900) represents your creditworthiness. Lenders use it to decide whether to lend you money and at what interest rate.
Factors That Affect Your Score
Payment History (35%): On-time payments boost your score; late payments hurt it significantly.
Credit Utilization (30%): How much of your available credit you're using. Keep below 30%.
Credit History Length (15%): Longer history is better. Don't close old accounts.
Credit Mix (10%): Having different types of credit (cards, loans) helps.
New Credit (10%): Too many applications in a short time can lower your score.
How to Check Your Score
Check your score for free through CIBIL, Experian, or your bank's app. Review your report annually for errors.
Improvement Strategies
Pay bills on time, every time. Keep credit utilization low. Don't close old credit cards. Limit new credit applications. Dispute any errors on your report.