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How to improve your credit score before applying for loans

Upstox
By Upstox News Desk

3 min read | Updated on May 19, 2025, 19:16 IST

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SUMMARY

Keeping track of your credit score and taking steps to improve it is necessary for building a strong credit history and increasing your chances of loan approval. A credit score above 700 is generally considered good, as it indicates low risk to banks and other financial institutions, making loan and credit card approval easier.

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In India, four RBI-licensed credit bureaus provide credit scores: Experian, CIBIL, Equifax and CRIF High Mark.

A credit score is a 3-digit number, usually ranging from 300 to 900, that reflects how reliable a person is with managing debts. Basically, it is an indicator of an individual’s credit history and highlights the creditworthiness of a borrower. The higher the score, the more likely someone is to repay a debt on time.

Credit scores highly impact loan eligibility, approval, interest rates, credit card limits, and other credit-related decisions. Some jobs and rental applications also require a decent credit score.

Many factors impact the credit score of borrowers, including transaction history, credit utilisation (how much they spend from their credit limit), duration of credit history, and the number of credit cards and loans in their name.

Tips to improve credit score before applying for loans:

Pay on time: Pay your credit card bills, EMIs and loan instalments on time to maintain a healthy credit history. Use your credit tools consistently and make timely payments to demonstrate responsibility to lenders, who will consider these factors before granting you a loan.
Repay missed payments instantly: If you miss a payment, repay it immediately to limit the damage. Over the long run, it will help restore your creditworthiness.
Credit limit: Always aim at keeping your credit utilisation ratio low by getting a credit card with a much higher limit as compared to your expenditure. This will eventually boost your credit score.
Maintain old credit cards: Don’t close your credit cards, especially the oldest ones. This is important to build a strong and long credit history.
Limit applications for financing: Don’t apply for a credit card or a loan too often, as it depicts reliance on credit and financial instability. Limit the number of credit cards you have and try not to apply for multiple loans at once.
Long loan tenures: Choose a loan with a long repayment tenure so your EMIs are low and you can ensure making payments on time. If your monthly payments are low, you won’t default, and your credit score will improve.
Analyse your activities: Always keep a check on your financial activities. Regularly check your credit card statements to make sure you don’t miss any errors or unauthorised transactions. Keep a check on your spending habits to avoid unnecessary expenses.
Also see: 10 mistakes to avoid while using credit cards

In India, four RBI-licensed credit bureaus provide credit scores: Experian, CIBIL, Equifax and CRIF High Mark.

The credit bureaus gather data from banks and other financial institutions to generate a credit report for an individual. A score higher than 700 is considered good and indicates a low risk to financial institutions.

Further, any score below 579 is considered to be poor and acts as an indicator of high risk of default. To improve your credit score, it usually takes 4 to 12 months to see noticeable changes, or even more, if you have a complex credit history.
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About The Author

Upstox
Upstox News Desk is a team of journalists who passionately cover stock markets, economy, commodities, latest business trends, and personal finance.

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