A New Era of Credit Access
The story of credit in India has transformed over the last decade. As of early 2026, an astonishing 74% of credit-eligible Indians have accessed formal credit at least once, a figure that has more than doubled from just 35% in 2017. This boom isn't just about
more people taking loans; it's about a fundamental shift in borrowing habits. The growth is overwhelmingly driven by consumption-led products like personal loans, credit cards, and financing for consumer durables. This reflects a change from borrowing primarily for large assets like homes to financing lifestyle purchases, particularly among younger consumers. This expansion, fueled by digital infrastructure and proactive lending from banks and fintech companies, has pushed credit access far beyond traditional hubs, with northern and central states showing the fastest growth.
Beyond the Due Date
For years, the golden rule of maintaining a good credit score was simple: pay your bills on time. Your payment history remains the single most important factor in your credit score, making up about 35% of it. A single payment missed by over 30 days can cause a significant drop in your score. However, with more people in the system and lenders becoming more sophisticated, a perfect payment history is now the starting point, not the finish line. Lenders are increasingly looking at a borrower’s complete financial picture to gauge risk. They are asking a more complex question: not just ‘Does this person pay on time?’, but ‘Can this person truly afford to take on more debt?’. This is where the concept of total repayment capacity comes into play.
What 'Total Repayment' Really Means
The idea of 'total repayment' isn't a formal metric but a shift in lender mindset towards a holistic assessment of your debt. It primarily involves two key indicators: your Debt-to-Income (DTI) ratio and your Credit Utilisation Ratio (CUR). Your DTI ratio is the percentage of your monthly income that goes towards paying existing EMIs. Lenders are becoming stricter about this; if your existing EMIs already consume over 40-50% of your income, securing a new loan becomes significantly harder. Your Credit Utilisation Ratio measures how much of your available credit limit (on cards and credit lines) you are using. Consistently using a high percentage of your limit, even if you pay the minimum amount on time, signals to lenders that you are financially stretched. A lower utilisation ratio, ideally below 30%, indicates you manage your finances well and have room to handle more credit.
The Fintech and Data Revolution
This shift towards deeper analysis is powered by technology. Fintech companies and digital lenders have been instrumental in expanding credit access, especially for small-ticket personal loans. These firms leverage vast amounts of data—beyond what's on a traditional credit report—to build a more nuanced profile of a borrower. They use AI and machine learning models to assess repayment capability in near real-time. As these technology-driven lenders capture a larger share of the market, their sophisticated risk models are becoming the industry standard. Even traditional banks are adopting similar data-heavy approaches to stay competitive and manage risk, especially as regulators keep a close watch on the rapid growth in unsecured lending.
How This Affects You as a Borrower
In this new environment, maintaining a good credit profile requires more than just avoiding late fees. The first step is to know your numbers. Regularly check not just your credit score, but also understand your DTI and credit utilisation ratios. Aim to keep your total EMI obligations manageable and your credit card balances low relative to their limits. When paying off debt, prioritising high-interest credit card debt can improve your utilisation ratio and positively impact your score relatively quickly. It's no longer just about avoiding negative marks on your report; it's about actively demonstrating financial stability and responsible debt management. This proactive approach will make you a more attractive candidate for lenders when you need credit for your next big goal.
