What Is a Credit Score and Why It Matters in India

A credit score is a three-digit number, usually between 300 and 900, that reflects how responsibly you have handled credit in the past. Banks and NBFCs look at this score when you apply for a personal loan, business loan, car or vehicle loan, or even a credit card.

In India, your credit score is maintained by recognised credit bureaus such as CIBIL (TransUnion), Experian India, CRIF High Mark, and Equifax. These bureaus collect your credit data from banks and financial institutions.

The Reserve Bank of India (RBI) also issues guidelines that influence how credit is reported and managed in the country, making your repayment behaviour extremely important.

Ideal Credit Score Range for Loan Approval

The higher your score, the more comfortable lenders feel in offering you better terms. Here’s a simple overview of what different score ranges typically mean in India:

Tip: If your score is below 700, it is wise to focus on improvement before applying for a big loan like a home loan or high-ticket business loan.

Proven Ways to Improve Your Credit Score in India

1. Pay All EMIs and Credit Card Bills on Time

Timely repayment is the single most important factor in building and maintaining a good credit score. Even one missed EMI or credit card payment can negatively impact your score. Consider setting up auto-debit or payment reminders through your bank app or UPI app.

2. Keep Your Credit Utilisation Below 30%

Try not to use more than 30% of your total credit card limit. For example, if your credit limit is ₹1,00,000, aim to keep your usage within ₹30,000. Consistently maxing out your card signals higher risk to lenders, even if you pay on time.

3. Avoid Applying for Multiple Loans or Cards at the Same Time

Every time you apply for a credit product, the lender makes a hard inquiry on your report. Too many hard inquiries within a short period can reduce your score and give the impression that you are credit-hungry.

4. Check Your Credit Report Regularly for Errors

Sometimes, old closed loans may still appear as active or incorrect late payments may show up on your report. You can download your credit report from CIBIL or other bureaus and raise a dispute if you find any mistakes.

5. Maintain a Mix of Secured and Unsecured Loans

A balanced credit profile includes both secured loans (like gold loans, home loans) and unsecured loans (like personal loans and credit cards). Responsible repayment across these products shows lenders that you can handle different forms of credit.

6. Avoid “Settling” Loans Whenever Possible

If a loan is marked as “settled” instead of fully “closed”, it can harm your score and remain in your credit history for years. Whenever possible, try to fully pay off and close loans in a proper manner rather than opting for a settlement.

Frequently Asked Questions on Credit Score Improvement

1. Not Having an Emergency Fund

One of the biggest financial mistakes people still make in 2025 is not keeping money aside for emergencies. A sudden medical expense, job loss, or repair can force you into high-interest debt if you don’t have a buffer.

Ideally, aim to build an emergency fund of at least 3–6 months of basic expenses in a simple savings account or liquid fund. Even starting small – saving a fixed amount every month – is better than having no backup at all.

2. Relying Too Much on Credit Cards

Credit cards are useful when used wisely, but depending on them to cover daily expenses is risky. Revolving balances and high interest can quickly trap you in a debt cycle.

Try to pay your total outstanding amount every month instead of just the minimum due. If you’re already stuck with high dues, consider consolidating or restructuring your loans through a more manageable personal loan.

3. Ignoring Your Credit Score

Many people only think about their credit score when a loan is rejected. In 2025, your credit score affects everything – from loan approval and interest rates to credit card limits and even some rental agreements.

Make it a habit to check your report at least once a year using trusted platforms like CIBIL or Experian India. If you notice errors, raise a dispute immediately.

4. Not Tracking Monthly Expenses

With UPI, credit cards, and subscription payments, money can go out in small amounts that add up to a big monthly leak. Not tracking your expenses is a silent but serious mistake.

Use a simple spreadsheet, notebook, or budgeting app to categorise your spending into needs, wants, EMI, and savings. This gives you clarity on where your money is really going.

5. Only Paying the Minimum Due on Loans and Cards

Paying just the minimum due might keep your account active, but it hardly reduces your principal amount. Over time, this leads to years of repayment and massive interest outgo.

Wherever possible, pay more than the minimum and close high-interest debts first. If your existing loans are too scattered, consider combining them into a single business loan or personal loan with better terms.

6. Taking Too Many Buy-Now-Pay-Later (BNPL) and Small EMIs

In 2025, it’s easier than ever to convert purchases into EMIs or use “Buy Now, Pay Later” services. While convenient, too many small EMIs can silently eat into your monthly cash flow and affect your credit score if missed.

Before opting for an EMI, ask yourself: “Would I still buy this if I had to pay full amount today?” If the answer is no, reconsider the purchase.

7. Being Underinsured or Not Having Insurance

Many families still ignore health and life insurance, assuming nothing will go wrong. A single hospitalisation can wipe out years of savings if you are not adequately insured.

Review your health, life, and term insurance needs. You can refer to reliable sources like IRDAI or RBI websites for guidelines on responsible insurance and borrowing.

8. Investing Without a Clear Goal

Randomly investing in schemes just because they are trending, or because a friend recommended them, is a common mistake. Without clear goals, you may take either too much risk or too little.

Define your goals – such as education, home purchase, retirement, or a dream vacation – and choose products suited to your risk profile and time horizon. You can also read educational content on portals like Moneycontrol Personal Finance.

9. Not Planning for Retirement Early

Many people in their 20s and 30s believe retirement is “too far away” to start planning. But the earlier you start, the more you benefit from compounding.

Even a small monthly investment towards your retirement corpus in 2025 can make a big difference 20–25 years later.

10. Not Comparing Loan Options and Falling for Quick Money Traps

Instant loan apps and unregulated financers may offer quick money but often come with hidden charges and very high interest rates. Always compare interest rates, processing fees, and terms before borrowing.

Choosing a transparent and regulated lender like Thirukochi Fincap for gold loans, personal loans, or education loans ensures you know exactly what you’re signing up for.

Frequently Asked Questions on Financial Mistakes in 2025

Why Quick Loans Matter for Small Businesses in Kerala

Small businesses often face cash-flow challenges, especially in sectors like retail, trading, small manufacturing, food services, and local services. Traditional banks usually take several weeks to process loans, making it difficult for entrepreneurs to act fast.

Quick loans from trusted NBFCs such as Thirukochi Fincap offer:

• Fast approval and disbursal (sometimes within 24–72 hours)
• Minimal documentation
• Flexible repayment options
• Lower entry barriers for small business owners

These benefits are changing how entrepreneurs plan expansions, upgrade machinery, manage stock, and run daily operations.

How Quick Loans Are Influencing Kerala’s Business Ecosystem

1. Supporting Daily Cash Flow Needs

Cash flow is the heart of small businesses. Quick loans allow owners to manage daily operational costs—raw materials, rent, wages, and inventory—without delays. This smoothens business flow and prevents financial stress.

2. Helping Businesses Upgrade Equipment

Whether it’s buying bakery equipment, textile machines, new tools, or digital POS systems, business owners can now upgrade faster. This leads to better productivity and higher profit margins.

3. Enabling Faster Expansion

Many entrepreneurs in Kerala are using quick loans to open new outlets, expand product lines, or improve supply chains—something that earlier took months due to long bank processes.

4. Boosting Digital Adoption

With the rise of digital payments and online marketplaces, Kerala businesses are investing in digital tools. Quick loans help them:

• Launch online delivery services
• Run digital marketing campaigns
• Integrate QR and POS payment systems

5. Encouraging Women Entrepreneurs

Kerala has seen a massive rise in women-led microbusinesses. Quick loans, especially Mahila Shakthi Loans, give women easier access to capital, boosting home businesses, boutiques, food startups, and handicraft operations.

Quick Loans vs Traditional Bank Loans

Here’s a quick comparison to understand the growing preference:

Quick loans from credible NBFCs like Thirukochi Fincap follow RBI-guided lending norms — always choose registered lenders.

Industries in Kerala Benefiting the Most

• Local retail shops
• Food and restaurant businesses
• Textile and garment units
• Beauty parlours & salons
• Ayurvedic and wellness centres
• Small-scale manufacturing
• Tourism and hospitality-related services

For more insights on business financing, refer to Moneycontrol SME and RBI guidelines.

Frequently Asked Questions