Having a good credit score (CIBIL score of 750 and above) opens your window to premium credit cards, better loan offers and affordable interest rates. On the contrary, a bad credit score (below 700-650) is likely to pull these offers away from you. However, it is better to call it a lower score because there are 4 credit bureaus at work in the country and a bad credit score becomes a relative term.
What is a bad credit score?
Bad is a relative term and hence it is better to use the term, a ‘low credit score’. Your credit score ranges from 300 to 900. If this number is going further down from 650, you need to evaluate your credit health. However, this number varies from one credit bureau to another.
| Rating | Credit Score* |
| Excellent | 770+ |
| Good | 650 – 770 |
| Needs Improvement | Below 650 |
*Ratings of one credit bureau are different from that of the other. Thus, you should consider these scores as indicative numbers only. For exact rating, you should check your credit report generated from Paisabazaar.com.
What leads to a bad/low credit score?
Check the table below to understand the good and bad practices that can affect your credit score:
| Good Credit Practice | Bad Credit Practice |
| Timely payment of credit card bills and/or loan EMIs | Delayed or missed payments |
| Low credit utilization (Using 10-15% of the total credit limit) | Too much credit usage (Credit Utilization Ratio of more than 30% of the total credit limit) |
| Checking credit report regularly | Rare credit score and credit report checks |
| Paying off debt soon | Moving around debt payments or applying for a new credit card/personal loan to pay the existing credit card bills |
| Opening credit account only when absolutely necessary | Opening multiple credit accounts only to build a credit history and missing out on payments |
How will a bad credit score impact you?
A bad or lower credit score may impact you in multiple ways since you’re viewed as a big risk by the mainstream lenders and this is not a good thing. Following are the demerits of having a low credit score:
- Banks will most likely give you a loan at a higher rate of interest which means you will end up paying more than someone with a better credit score, say 750 or more. This is because banks and other financial institutions may view you as a risky customer and thus would like to recover their loan as soon as possible by levying heavy interest.
- You will not be able to access premium credit card benefits. When your credit score is high, you are given good introductory and/or cashback offers. You may also get good deals on shopping and movie tickets. A bad score may make you miss out on all these.
- You may have to pay a higher insurance premium. Nowadays, insurance companies check your credit score to see how reliable you are with timely payments. If you’re paying your credit bills and/or EMI payments on time, it will up your credit score. This will in turn make the insurance companies confident of your premium payments in time.
In a nutshell, it is advised to keep your credit score as high as possible. To tackle such a situation, use less than 30% of your credit limit and always pay your dues on time. Also, do not apply for multiple credit cards and/or personal loans in an arbitrary manner. These three factors shall definitely help maintain a good credit score.