Impact of your credit score on financial planning


The success of financial planning depends on the optimum utilization of the available resources. You may have to switch towards credit means toImpact of your credit score on financial planning suffice the need of funds when sources of income are not enough. Hence, credit score plays an important role to decide the success of financial planning.

When you possess a good credit score you can borrow money from a bank at a competitive rate. In this article, we present to you impact of your credit score on financial planning which you must know.

The importance of a credit score

Credit score is a three digit numerical value. It ranges from 300 to 900. One gets a credit based on his/her earlier credit history. The person with greater credit score has higher chances to get credit from lenders.

A low credit score may cause rejection of the loan application. If the bank decides to lend to a person with low credit score, he will have to pay a higher interest. This practice is called risk-based cost adjustment.

Which body overlooks and maintains the credit scores in India?

The CIBIL records the credit scores of individuals & companies along with Transunion in India.  Full form of CIBIL is Credit Information Bureau of India Ltd.

How to access the credit score?

A person can access his credit report straight from CIBIL. The report is popularly called as Credit Information Report or CIR. You should analyze your credit score before you decide to take any credit. This will help you to take appropriate steps. A person with a decent credit score can negotiate with banks to get credit at a good interest rate.

Clear all the dues prior to the due date

You should clear all your dues such as EMI and credit card bills prior to the due date. A person should allocate less than 30% of the total credit available towards non-secured loans such as personal loan & credit card loans.

When a person is laden with several credit cards with outstanding balances, it will affect his chances of loan approval. Also a person’s loan portfolio should be a healthy combination of credit types such as house loan, vehicle loan with at least 1 or 2 credit cards.

Further you can browse through more important aspects of credit card:

  • A person’s usage of credit card determines the extent of relationship of that person with the particular bank. Therefore, a person needs to give a due thought before closing a credit card. You must remember that overuse of a credit card impacts one’s credit history negatively. On the other hand, not using a credit card implies financial security.
  • A person is equally responsible for joint accounts & add-on credit cards. Therefore, he/she must supervise them regularly for default payments and other necessary corrections.
  • Applying for frequent unnecessary credit must be avoided as lenders demand credit enquiry which creates a negative impact on the credit score of a person.
  • You should review your credit history at least once in a year to take necessary actions.


When you understand and maintain a decent credit history, it eases your financial processes like applying for a loan.


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