How Credit Scores Work in India: What Moves Your Score

When you borrow, through a loan, a credit card or even a phone bought on EMI, the lender regularly reports how you repay to credit information companies (CICs), also called credit bureaus. India has four, all licensed by the Reserve Bank of India: TransUnion CIBIL, Equifax, Experian and CRIF High Mark.

Each bureau keeps a credit report listing your accounts and repayments, and turns it into a credit score. Experian India’s score, for example, runs from 300 to 900. As RBI puts it, the higher the score, the better your chances of getting a loan. Lenders still make their own decision and look at other details, such as your income.

Each bureau uses its own formula, and they describe the factors as high, medium or low impact rather than as exact percentages. Experian India lists:

• Payment history (high impact): paying every EMI and card bill in full and on time. Missed or late payments pull the score down.
• Credit utilisation (high impact): how much of your available limit you use. Experian suggests using up to 40% of your limit; CRIF High Mark suggests under 30–40%.
• Age of credit (medium impact): a longer track record helps.
• Mix of accounts (low impact): having both secured loans, such as a home loan, and unsecured credit, such as a credit card.

CRIF High Mark also counts recent credit enquiries as a low-to-medium factor.

When you check your own score, that is a soft enquiry, and it does not affect the score. When you apply for a loan or card and the lender pulls your report to decide, that is a hard enquiry, which can lower your score for a while. Applying to many lenders in a short time means several hard enquiries close together, so it is worth comparing offers carefully before you apply.

Rohan and Amit, two friends in Mumbai, each get their first credit card with a ₹50,000 limit.

• Rohan spends about ₹15,000 a month, which is 30% of his limit, and pays the full bill before the due date.
• Amit regularly spends ₹45,000, which is 90% of his limit, pays only the minimum due and is sometimes late.

After a year, Rohan has a clean payment record and low utilisation, the two high-impact factors. Amit has high utilisation and late payments on his report, so his score is likely to suffer, and lenders may offer him less credit or charge him more.

RBI’s Credit Information Reporting Directions give borrowers several protections:

1. A free full credit report, including your score, once every calendar year (January to December) from each bureau.
2. Alerts by SMS or email when your credit report is accessed, and when a lender reports a default or overdue payment.
3. Error correction: if your report is wrong, complain to the bureau or lender. If the complaint is not resolved within 30 calendar days, you are entitled to compensation of ₹100 for each day of delay.

This page is general information, not financial advice. For help with your own finances, speak to your lender or a qualified adviser, such as a SEBI-registered investment adviser.