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What’s a Good Credit Score in Your 20s

You're only starting your financial life when you're in your 20's which involves earning the first paycheck, applying for a new credit card, and even handling your savings accounts. Yet, building your loan and maintaining a strong credit score is another critical aspect of your financial life in your 20s. You may be asking a question now: What is a good credit score and why is it important?

What is a credit score?

A credit score is a three digit number that determines your creditworthiness. This number tells lenders, in other words, how likely you are to repay your loans and whether you're a liable borrower. There are several different kinds of credit scores, but CIBIL score is the most common in India. The credit score range for CIBIL is from 300-900. The lower the score, the worse it is for your credit. A higher credit score can get you loans at a low rate of interest.

So what is meant by a good credit score?

CIBIL has numerous credit scoring categorizations and while scores between 300 and 549 are considered poor, anything from 550 to 700 is considered fair. The closer the score is to 900, the better it signifies.

Bear in mind that when you're in your 20s, your credit history is being built and the length of your history is taken into account by your credit score. That aspect can only be helped by time, so if you maintain good financial habits, your CIBIL score will improve.

So why do credit scores differ according to age groups so much? A lot of this has to do with what's going on in the life of the average person.

  • Your credit history  is also very young in your 20s. It can have a huge effect on the average age of your loan any time you take on a new credit card or debt when in your 20s. You're still really in the process of creating a credit profile from the scratch in your 20s.

  • Your credit ticks upward in your 30s because you had almost 10 years to build a strong payment history and average credit history. You've also probably produced a better mix of debt at this stage, including credit cards, car loans, and maybe even a mortgage, which will help boost your credit.

  • The average age of your loan tends to grow as you continue going over the years, and the account mix increases. You are now in your peak earning years in your 40s and 50s, so your income has definitely greatly increased. This higher revenue will lead to higher credit limits, reducing your usage ratios and raising your credit score.

  • You're nearing or even going into retirement in your 60s and have reduced your debt in preparation for living on a fixed income.

Why is a good credit score important?

Let's be honest, it may seem very random to maintain a good credit score in early age but when it comes to having your first house or applying for your first credit card, it's nonetheless necessary. So, why is that? For getting eligible for a home loan, your credit score will either make or break it. It can also decide whether you get a credit card accepted or rejected. The interest rate you get may also be influenced by it. This is important to understand, because interest will cost you a lot of money over time if you take out a loan. Even the difference between a few percentage points can theoretically cost you interest worth hundreds or thousands of rupees.

So it will help you save money and help you get better interest rates by getting a good credit score.

How are you able to increase your credit score?

What if you somehow do not have a decent credit score? Or, maybe you want to keep your good credit score in place for a longer period?

To raise your credit score, here are a few basic rules to live by. Take a glance:

  • Having all your payments on time is the most important. The bulk of your credit score is calculated by your payment history, so it has the greatest effect.

  • Maxing out your cards every month will signal lenders' alarms and make you look like a danger.

  • Lastly, try not to open up too many new credit lines. In a short period of time, opening too many lines of credit can look risky to lenders and lower your credit score.

As you can see in your 20s, taking action and being accountable can help you develop your credit over time. Are you ready in your 20s to boost your credit score and start growing up?

Checking your CIBIL score and credit report on a regular basis is important, whether you’re planning to take a loan or not. You can check your CIBIL score by PAN card online within minutes. All you need to do is visit the Finserv MARKETS website or app, where you can obtain your CIBIL score for free. Once you check CIBIL score by PAN card, you can make a decision about whether to opt to apply for loans, credit cards, etc. or focus on improving your score first.

What’s more, you can also apply for hassle-free personal loan, business loan, or home loan with minimal documentation.

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