Credit score basics: What’s considered bad and how to turn it around

In India a credit score is an extremely important indicator of an individual’s financial health. It influences personal loan approvals, interest rates, credit card eligibility, future loan approvals, applicable interest rates and tenure period. As of May 2025, a credit score below 650 is generally considered poor.

It has the potential to limit access to favourable financial products such as easier interest rate loans, premium credit cards along with other borrower friendly financial opportunities.

The Reserve Bank of India (RBI) has emphasised the importance of both financial literacy and credit awareness through numerous press releases and directions. To further facilitate the same individuals are entitled to a free credit report annually.

This particular report includes the complete details of inquiries made by credit institutions while considering new credit facilities. This initiative aims to foster transparency and empower credit card users to manage their credit profiles efficiently.

On the issue of low credit scores, Siddarth Jain, CFO at MinEmi said that, “A low credit score doesn’t always mean financial irresponsibility. Many borrowers fall into lower score brackets due to temporary disruptions like missed alerts, job loss, or post-pandemic recovery and not long-term defaults. The key is to identify the reason, stay consistent with repayments, and avoid multiple new credit inquiries while rebuilding the profile.”

Therefore, keeping the above points in mind, to boost your credit score you can consider following the below given steps diligently.

Steps to boost your credit score in 2025

1. Make payments on time: Your payment history significantly influences your credit score. This helps in keeping track of your consistency, integrity and honesty in making payments on time. That is why consistency means improvements in payments.
2. Maintain Low Credit Utilisation: Focus on using less than 30% of your total allowed credit limit. High credit utilisation signifies over dependence on loans, credit cards etc. Such high dependence can negatively influence your score.
3. Limit new credit applications: Every new credit application can result in a hard inquiry on your credit profile. This can slightly lower your credit score. That is why do make a note of this fact, apply for new credit lines i.e., a new credit card, a new personal loan etc., only when necessary. Do also ensure that you space out applications to minimise the negative impact of hard inquiries.
4. Regularly monitor your credit Report: Errors or omissions can adversely affect your score. Regularly reviewing your credit report allows you to identify and rectify inaccuracies promptly.
5. Build a balanced credit mix: Having a mix of secured and unsecured credit, such as home loans and credit cards, indicates your ability to manage various credit types, positively influencing your score.
6. Avoid frequent loan and credit card applications: Multiple applications within a short period can signal financial distress to lenders. Limiting the frequency of applications helps maintain a stable credit score.

Therefore, once you clearly understand the concept of a bad credit score i.e., a score that makes borrowing complicated and can result in higher interest rates, more delays and stipulations in loan and credit facilities. It is only then that you can work towards improving it following well established rules and principles as discussed above in a diligent manner.

Disclaimer: Mint has a tie-up with fintechs for providing credit; you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit scores. Mint does not promote or encourage taking credit, as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.