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What is a Credit Score? In today's world, whether you need to take out a loan, get a credit card, or avail of any financial service, one thing matters a lot: your credit score. Many people only understand its importance when a bank rejects their loan application. Therefore, it's crucial to understand what a credit score is and how to maintain a good one.

What is a Credit Score?
A credit score is a three-digit number that indicates how reliable you are in repaying debts. In India, this score typically ranges from 300 to 900. If your score is 750 or higher, banks and financial companies consider you a good customer and readily grant you loans. This score is based on your past loan history, credit card payments, and financial behavior.

How is a Credit Score Calculated?
Your score depends on several factors:

Timely EMI and bill payments
The total amount of debt you have
The percentage of your credit card limit you are using
The number of new loans or cards you have applied for
Your past credit history

How to Build a Good Credit Score?
Building a good score isn't difficult; you just need to improve a few habits:

1. Pay on Time
Pay every EMI and credit card bill on time. Even one late payment can lower your score.

2. Keep Credit Usage Low
Try not to use more than 30% of your credit card limit.

3. Avoid Frequent Loan Applications
Applying for too many loans makes banks think you are in urgent need of money, which can lower your score.

4. Don't Close Old Credit Cards

What are the benefits of a good credit score?
Your old credit card or loan history shows that you have been making payments responsibly for a long time. The older and cleaner your record, the more trust banks will have in you, and the stronger your credit score will be. A credit score is a number that reflects your money management habits. Banks use it to assess whether you are a reliable customer. A good score makes it easier to get loans and often results in lower interest rates. Therefore, spend wisely and pay your EMIs and bills on time. These small habits can lead to significant benefits in the long run.

Disclaimer: This content has been sourced and edited from NDTV India. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.