Personal Loan vs Credit Card: Which One Makes More Sense for You?

If you’ve ever been rejected for a loan and didn’t know why, the answer probably hides behind three digits: your credit score.

In India, that score silently decides whether banks trust you. It shapes everything — from your credit card limit to your dream home loan. Yet most people don’t understand how it works until it’s already too late.

Let’s fix that.

What is a credit score?

A credit score is a number between 300 and 900 that reflects how responsibly you’ve handled loans and credit cards.
In India, the most common is your CIBIL score, tracked by TransUnion CIBIL.

750 and above = excellent

700–749 = good

600–699 = average

Below 600 = risky territory

Banks love predictability. Your score tells them how “risky” you are as a borrower.

How is your credit score calculated?

1. Payment history (35%) – Missing EMIs or credit card dues hurts most.

2. Credit utilisation (30%) – Using more than 30% of your card limit regularly drags your score down.

3. Length of credit history (15%) – The longer you’ve had credit, the better.

4. Credit mix (10%) – Having both secured (home, car) and unsecured (cards, personal loans) credit shows maturity.

5. New credit inquiries (10%) – Too many loan applications make you look desperate.

How to improve your credit score fast in India (2025)

1. Pay every EMI and credit card bill on time.
   Set reminders or automate payments. One missed bill can pull down your score by 50–100 points.

2. Keep your credit utilisation below 30%.
   If your card limit is ₹1 lakh, stay below ₹30,000 monthly. High usage signals dependency.

3. Don’t close old credit cards.
   They add to your credit history length, which boosts your score.

4. Avoid multiple loan applications in a short period.
   Each “hard inquiry” hurts your score. Research, then apply once.

5. Check your CIBIL report for errors.
   You can get one free report per year. Dispute mistakes immediately.

How long does it take to fix a bad credit score?

Usually, 6–12 months of disciplined behaviour can move you from poor to good. But improving your score isn’t a one-time fix — it’s a lifestyle change.

The emotional truth about credit

Indians fear credit the way our parents feared debt. But avoiding credit entirely doesn’t build trust — responsible use does.
Your credit score is not a punishment; it’s a mirror. It reflects your consistency, not your worth.

Final Thought

Don’t chase a number. Chase habits that create one.
Because a good credit score isn’t about loans — it’s about financial respect.