As the festive season ushers in a flurry of sales, nearly every e-commerce platform is hosting its own exclusive offers. These enticing deals often feature options such as ‘buy now and pay later’ or ‘commence your EMIs at a later date.’ While these bargains may be intriguing, it’s essential to understand that using your credit card for these purchases can have a lasting impact on your credit score.
In the following discussion, we will look into the ramifications of credit card utilisation on your credit score.
What are credit scores?
A credit score, a three-digit numerical representation, that measures your credit management proficiency. It holds significant importance for financial institutions as they rely on it to assess your creditworthiness
Which agencies determine the credit score?
In India, credit scores are determined by the following credit Information agencies – Credit Information Bureau (India) Limited (CIBIL), Experian, Equifax, and Highmark. These four agencies are licensed by The Reserve Bank of India (RBI).
Credit Score Interpretation
| <300 | Not in the range |
| 300-550 | Very Low |
| 551-620 | Low |
| 621-700 | Fair |
| 701-749 | Good |
| 750+ | Excellent |
How do banks interpret it?
An excellent credit score helps you in availing competitive interest rates and will facilitate loan approvals or access to other financial products. The higher the score, the better it is for your overall financial health.
- What impacts the scores?
Missed your latest credit card EMI? Watch your credit score take a dip - A slight delay in settling your gold loan? It’s recorded as a missed payment
- Forgotten to pay the old loan due of 1,000 Rupees? Clear it off immediately
- Take a moment to review and verify the various loans linked to your account.
- Although it’s small, it could be a deal-breaker in terms of your credit score.
In conclusion, we recommend regular monitoring of your credit scores, keeping a close eye on your loan and credit card balances, and actively managing your credit rating.