620 Credit Score: Is It Good or Bad?

Your credit score influences your ability to access loans, credit cards, and other financial products. It is a metric which represents your ability to manage debts and repayments. A score of 620 is generally considered fair but indicates room for improvement. It may present certain financial challenges but also offers opportunities for growth if managed strategically.

 

In India, one of the most popular credit bureaus which calculates your credit score is TransUnion CIBIL. This typically ranges between 300 and 900. A 620 score signals potential concerns in your financial history, such as missed payments or high credit utilisation. However, understanding its implications and taking proactive steps can help you strengthen your financial profile over time.

Here’s how a 620 credit score is typically viewed by major credit bureaus in India:

A credit score of 620 sits on the threshold between fair and poor, affecting your financial options in the following ways:

Higher Interest Rates

Lenders may view individuals with a 620 credit score as higher-risk borrowers. As a result, you may qualify for loans or credit cards but at higher interest rates, increasing your overall cost of borrowing. 

Limited Loan Approvals

While a 620 score may not completely disqualify you from loans, it could reduce your chances of securing higher loan amounts or favourable terms. Lenders may be more cautious, particularly for unsecured loans like personal loans.

Restricted Access to Credit Cards

A fair credit score might limit your access to premium credit cards, which offer perks like cashback, travel rewards, or discounts. Instead, you may be eligible for basic cards with fewer benefits.

Higher Insurance Premiums

Insurance providers often consider creditworthiness as a factor when determining premiums. A lower credit score might result in higher insurance costs.

Difficulty in Renting Properties

Landlords may check your credit score when assessing rental applications. A 620 score could make it challenging to secure rental properties, especially in competitive markets.

Lower Negotiation Power

With a fair credit score, you may have limited ability to negotiate better terms on loans, such as reduced interest rates or flexible repayment options. Lenders are less likely to make concessions to borrowers perceived as higher risk.

Scrutiny in Employment Background Checks

Some employers, especially in finance or other sensitive industries, may review credit scores as part of background checks. A 620 score could raise concerns about financial responsibility.

Improving a 620 credit score requires consistent effort and financial discipline. Follow these actionable steps to enhance your credit profile over time:

Pay Your Bills on Time

Timely payments are the most critical factor in improving your credit score. Set up reminders or automate payments to ensure that you don’t miss due dates for loans, credit cards, or utility bills.

Reduce Your Credit Utilisation Ratio

Keep your credit card balances low relative to their limits. Aim for a utilisation ratio below 30% to demonstrate responsible credit management. For instance, if your credit limit is ₹1 lakh, try to keep outstanding balances below ₹30,000.

Avoid Applying for New Credit Frequently

Each credit application results in a hard inquiry, which can temporarily lower your credit score. Limit credit applications to when they are absolutely necessary.

Review and Report Errors in Your Credit Report

Regularly monitor your credit report for inaccuracies, such as incorrectly reported late payments or unrecognised accounts. Dispute errors with the credit bureau promptly to avoid unnecessary deductions to your score.

Focus on Clearing Outstanding Debt

Prioritise paying off outstanding debts, especially those with high interest rates. Reducing your debt burden can improve your debt-to-income ratio and positively impact your credit score.

Diversify Your Credit Portfolio

A mix of credit types, such as a combination of secured loans (e.g., home loans) and unsecured loans (e.g., credit cards), can help improve your creditworthiness. However, avoid taking on unnecessary debt just to diversify.

Avoid Closing Older Credit Accounts

The length of your credit history contributes to your score. Retain older accounts with positive payment histories to demonstrate long-term credit management.

Negotiate with Lenders

If you are struggling to meet repayment obligations, consider reaching out to your lender for alternatives, such as restructuring loans or extending repayment tenures. Avoid defaulting, as it can significantly harm your score.

Consider a Secured Credit Card

Secured credit cards, linked to a fixed deposit, can help rebuild your credit score. By using such cards responsibly and making timely payments, you can gradually improve your score.

Seek Professional Guidance

If managing credit feels overwhelming, consult a financial advisor or credit counsellor. They can help you create a personalised plan to improve your score and achieve your financial goals.

A 620 credit score reflects fair creditworthiness and may limit access to favourable financial terms. However, it also presents an opportunity for improvement. By practising disciplined financial behaviour, monitoring your credit report, and addressing areas of weakness, you can gradually enhance your credit score. Taking these steps can unlock better financial opportunities and pave the way for a more secure financial future.