Education has always been an important aspect of the Indian culture. Most of the students start planning for their higher education while they are in the middle of their under-graduation level. Parents usually start encouraging their children to plan for higher studies as soon as they complete their secondary education to secure a brighter and promising future. The push is higher if the student has plans to study abroad.

But we all need to keep in mind that the cost of education has changed drastically during the last couple of years. According to a report by the National Sample Survey Office, the average private expenditure for general education has increased by 175% between 2008 and 2014. As the economy and double-digit inflation took hold, college tuition and fees climbed rapidly to match or exceed inflation. In such a scenario, an education loan is the best way to fund your education in a seamless and hassle-free manner. And to avail such a credit option, one of the important parameters is to have a strong credit score.

In this article, we will decode the meaning of the term credit score and understand the importance of maintaining a strong score when applying for a student loan.

A credit score is a number between 300 and 850 which denotes a consumer’s creditworthiness. The higher the score, the better a borrower looks to potential lenders. A credit score is based on credit history – number of open accounts, total levels of debt, repayment history, and other factors. Lenders use credit scores to evaluate the probability that an individual will repay loans in a timely manner.

What do these ratings indicate?

A credit score of 700 or above is considered to be a good score while a score of 800 or above is considered to be excellent. A higher score indicates a better credit decision on your part which also increases the lender’s confidence in you in terms of being able to pay your future debts on time. This effectively eases your loan journey, irrespective of whether you are planning to study in India or study abroad.

Here’s a quick synopsis of what these scores indicate:
Impact of these numbers on your financial life:


If you have a score within this range, you are considered to be a responsible individual who manages his/her financial decisions carefully. You will be considered as a prime candidate to qualify for lowest interest rates on your education loan.

Very good

A score within this range indicates that you are a financially responsible individual when it comes to managing your money and credit. Most of your payments in terms of loan repayment, credit card bills, rental payments, etc. are made within the set deadlines.


Within this range you may still earn some competitive interest rates, but you may not get as much as the ones in the higher range. At times you may not qualify for all types of credit, including a student loan, easily. For instance, if you are looking for an unsecured loan type, you may have to explore several options prior to finding the right one that suits your needs.


Score in this range indicates that there might be some minor issues in your credit history but no major delinquencies. Lenders will offer their credit services but you may not enjoy competitive rates and other high end facilities.


This range indicates that you have multiple default payment for several credit products. You will have little or no chance in obtaining new credit/any forms of loan in future. To come out of this stage, you may need assistance from a financial advisor who can guide you to do the same.

Hence, it is extremely important to maintain a good credit score. And to do this, you have to make timely repayments, never delay or miss the deadline of repaying an EMI, judiciously use your credit cards, maintain a proper balance between secured and unsecured loan products so that your creditworthiness increases and you may enjoy other types of credit products at competitive interest rates.

If you have any query, please feel free to reach out to us. We will be happy to assist you to understand your credit score and how it will impact your decision of applying for an education financing solution to pursue your higher education.

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