678 Credit Score: Is It Good or Bad?

A credit score of 678 is generally considered to be a good score, highlighting responsible financial habits.  However, it also signals areas for improvement. While this score offers access to various credit products, it may come with certain limitations, such as higher interest rates or stricter loan terms. Understanding the strengths and weaknesses of a 678 credit score can help you take targeted steps to improve it. This can help make credit products more affordable and accessible.

Credit bureaus calculate scores using their own models and ranges, so the interpretation of a 678 score can vary slightly. Here’s how it typically aligns across major Indian bureaus:

A 678 credit score affects your financial prospects in several ways:

Limited Loan Approval Rates

Loan approvals are possible but may come with conditions, such as reduced loan amounts or the need for collateral, particularly for unsecured loans.

Higher Interest Rates

Lenders are likely to offer higher interest rates to individuals with a 678 CIBIL score compared to those with a score in the excellent range. This increases borrowing costs over time.

Limited Credit Card Choices

While basic and secured credit cards are available, access to premium cards offering significant perks like cashback, travel benefits, or reward points might be limited.

Higher Insurance Premiums

Insurers may consider a 678 CIBIL score as moderate risk, leading to higher premiums for life, health, or vehicle insurance policies.

Challenges in Renting Property

Landlords in competitive rental markets may view a 678 score as a slight risk, potentially requiring additional security deposits or references.

Limited Negotiation Power

With a fair credit score, negotiating for better loan terms, such as reduced interest rates or longer repayment tenures, can be more difficult.

Improving a 678 credit score involves consistent efforts and focused financial management. Here’s how you can elevate your score:

Prioritise On-time Payments

Your payment history significantly impacts your credit score. Ensure timely payments for all credit accounts, including loans, credit cards, and utility bills.

Lower Your Credit Utilisation

Aim to keep your credit card balances below 30% of your total credit limit. For example, if your credit limit is ₹2 Lakhs, ensure to maintain your usage under ₹60,000.

Avoid Multiple Credit Applications

Each credit application leads to a hard inquiry, which temporarily lowers your credit score. Apply for credit only when necessary and focus on managing existing accounts responsibly.

Monitor Your Credit Report for Errors

Regularly check your credit report for inaccuracies, such as unrecognised accounts or incorrect late payments. Dispute any discrepancies with the credit bureau.

Pay Off Your Outstanding Debts

Clearing debts, especially those with high interest rates, improves your debt-to-income ratio and reduces the financial burden, positively impacting your score.

Diversify Your Credit Portfolio

A balanced mix of credit types, such as credit cards, personal loans, and secured loans, demonstrates responsible credit behaviour. However, avoid unnecessary borrowing.

Keep Old Credit Accounts Open

The age of your credit history contributes to your score. Keeping older accounts with a positive track record open can improve your overall creditworthiness.

Opt for a Secured Credit Card

If your credit score limits your access to standard credit cards, a secured credit card linked to a fixed deposit can help rebuild your credit profile over time.

Seek Expert Advice

A financial advisor or credit counsellor can help you identify weak points in your financial behaviour and create a customised plan for improving your score.

A 678 credit score represents fair creditworthiness, providing access to credit but with certain limitations. By addressing areas like timely payments, credit utilisation, and debt reduction, you can elevate your score into the good range. With consistent effort and proactive financial management, you can secure better terms and greater financial flexibility, setting yourself up for long-term success.