Introduction to Building Your Credit Score
A strong credit score in 2025 is essential for securing loans with better terms. Loanpao provides expert tips to help you improve your credit score and achieve financial goals.
Factors Affecting Your Credit Score
Payment History
Timely EMI and bill payments contribute 35% to your CIBIL score.
Credit Utilization Ratio
Using less than 30% of your credit limit impacts 30% of your score.
Credit History Length
Longer credit history (15% of score) shows reliability.
Credit Mix
A mix of secured and unsecured loans affects 10% of your score.
New Credit Inquiries
Multiple loan applications in a short period impact 10% of your score.
Comparison of Credit Score Impact
How different actions affect your credit score in 2025:
| Action | Impact on Score | Weight | Time to Recover |
|---|---|---|---|
| Missing EMI Payment | -50 to -100 points | 35% | 6–12 months |
| High Credit Utilization (>50%) | -30 to -70 points | 30% | 3–6 months |
| Multiple Loan Applications | -10 to -30 points | 10% | 1–3 months |
| Timely EMI Payments | +20 to +50 points | 35% | 3–6 months |
| Reducing Credit Card Balance | +10 to +40 points | 30% | 1–3 months |
Note: Impact varies by individual credit profile and bureau (e.g., CIBIL, Experian).
Strategies to Build Your Credit Score
Proven ways to improve your credit score:
- Pay EMIs on Time: Set reminders or auto-debit for timely loan and credit card payments.
- Keep Credit Utilization Low: Use less than 30% of your credit card limit.
- Opt for Government-Backed Loans: Mudra or PMKVY loans often report to credit bureaus, building history.
- Avoid Multiple Applications: Space out loan or credit card applications to avoid hard inquiries.
- Use Loanpao Tools: Check eligibility and compare lenders to avoid unnecessary applications.
Frequently Asked Questions
A CIBIL score of 750+ is considered good for securing loans with favorable terms.
Building a credit score can take 6–12 months with consistent payments and low credit utilization.
Yes, small loans like Mudra or personal loans, when repaid on time, boost your credit score.
Missing payments, high credit utilization, and frequent loan applications can lower your score.
Loanpao offers tools like EMI calculators and lender comparisons to manage loans and build credit.