Authored by Ashish Goyal, MD & Group Director-Finance, Fibe:
As India navigates through change in demographics and aspirations, according to me, personal financial responsibility has become more important.
A healthy credit score can be the difference between securing a dream home or facing a loan rejection. Yet, despite growing ambition and digital awareness, many young Indians remain unaware about the same which silently sabotages their financial future.
We have seen firsthand how a strong credit score is more than just a number; it’s your financial reputation. It opens doors to lower interest rates, better credit products, and greater financial confidence. Yet, despite the RBI’s directions which allow availability of credit scores extremely convenient, misconceptions still cloud judgment. We need to cut through the commotion, understand how credit really works, how lenders look at it and take charge of financial health with clarity and confidence.
The credit score is shaped primarily by three major factors and that I would say is – time, repayment behaviour, and credit utilization. It requires patience and disciplined credit habits to build it properly in the long run. More than just the score, the overall report provides insights to potential lenders to help assess credit and make appropriate decisions. Also, keep in mind that each lender and product will assess the same credit report differently. For instance, home loan product lenders will approach credit products very differently than when a lender evaluates a credit card application.
Your salary doesn’t directly influence your score, but it impacts your eligibility with lenders. We always believed that what matters most is how you manage your existing credit, timely EMI payments, maintaining a low credit utilization ratio, and avoiding defaults. It is crucial to keep these points since I have seen salaried professionals with seven-figure earnings rejected loans due to careless credit behavior, yet others with smaller incomes have good credit ratings due to disciplined payments.
While we discussed credit scores extensively, borrowers need to understand that these are not the only factors considered by lenders. Lenders also consider various factors, including income levels, existing leverage, and ability to pay before issuing a line of credit. At a high level, lenders analyze several characteristics to gain confidence in two areas such as willingness to pay and ability to pay. I would say some of it is science, some is art.
We’ve noticed that when lenders assess someone for credit, they’re digging into the full picture.
- Your income, for instance, helps them gauge your repayment ability. A steady, higher income usually works in your favour, which is why salaried folks often get approved faster than those who are self-employed.
- The type of loan also matters. Secured loans, like home or car loans, feel safer for lenders because there’s collateral involved. But when it comes to unsecured loans like credit cards, they tend to look more closely at your credit behaviour.
- We’ve seen that borrowing too often or maxing out your credit limit regularly can make lenders cautious. And no, paying just the “minimum due” on your credit card isn’t always enough to reassure them.
- If someone suddenly opens multiple credit accounts or pushes for higher limits, it can be seen as a red flag. Lenders also track how your credit behaviour evolves over time, consistency and improvement matter a lot.
- They’ll often review your credit card activity, the types of credit you use, and even your bank statements. Things like average balances and transaction patterns help them decide whether you’re a reliable borrower or not.
While this may appear to be a lot to handle, it goes back to foundational principles, which state that ‘simplicity’ and ‘consistency’ will win in the end. As lenders, we want to know “why” as well as “how much.”
As I said earlier, the length of your credit history has a significant impact on your credit score. Older accounts demonstrate long-term financial behaviour. As a result, keeping a balanced mix is beneficial in the future. Over the years, I’ve found that consistency is everything. Pay your dues on time always. Keep your credit utilization below some percentage of your limit. Don’t apply for multiple loans or cards in quick succession. Review your credit report at least twice a year and dispute any inaccuracies you spot.
Many assume that having no debt means a perfect score. In reality, no credit activity often means no credit score at all. Without any credit activity, the system has no data to evaluate your reliability. To help you stay on top of your credit and manage it effectively, modern fintech platforms are evolving beyond loan disbursals to become comprehensive financial wellness partners. Besides, platforms now come with in-built tools that help users track their credit scores in real-time, get alerts for changes, and receive personalised tips to improve their scores. These platforms also help you understand why your score went up or down, was it a missed payment, or a spike in credit usage.
More importantly, we’ve found that integrating credit education into the borrowing journey leads to much better outcomes for the customers. The common myth is that checking own credit score harms it. In reality, it is completely safe, on contrary, regularly checking your credit report helps you stay informed about your financial standing and identify areas for improvement. If you spot errors, like incorrect credit card entries or loans you didn’t take, you can raise a dispute directly with the credit bureau or the financial institution that reported it.
In a world where everything from a car loan to a home rental hinges on your creditworthiness, there’s no room for guesswork. For stepping into financial independence, understanding how credit scores work is the first step. Small, consistent actions today can pave the way for greater financial freedom tomorrow. After all, a healthy credit profile is not built overnight but through informed and mindful decisions over time.
Reputations are built over time but ruins in minutes. Same is true for credit reputations. Tread your credit score carefully.
This is authored by Ashish Goyal, MD & Group Director-Finance, Fibe
