It appears like just any other three-digit number. However, there is a lot of data behind it. Your financial history is what determines your credit score. This includes the manner in which you have repaid loans, the level of credit you have used, and the frequency with which you have borrowed. With the ease of loan availability enabled by technology, it is important to understand what really makes up your credit score.
In an interview with Mint Money, Rohit Patwardhan, the Chief Credit Officer of HDB Financial Services, reveals what really goes on behind the loan application process. This includes the reasons why paying on time is not enough, the impact of not paying the entire , and the impact of applying for too many loans. Other issues discussed include ghost loans, rising loan delinquencies, and how first-time borrowers are assessed.
Edited Excerpts
What are the top 3–4 factors that have the biggest influence on an individual’s credit score today? And which is most commonly misunderstood by borrowers?
At its core, a reflects financial behaviour over time. The biggest drivers remain fairly consistent: repayment track record, how much of your available credit you use, the mix of credit products, how long you’ve been in the system, and recent enquiries.
If I had to call out one area that’s often misunderstood, it would be credit utilisation. A lot of borrowers believe that as long as they’re paying on time, they’re doing everything right. But regularly running high balances, even if you repay them, can still work against you. It tends to signal dependence on credit rather than comfort with it.
From our side, the approach is not just to evaluate credit but to help shape better credit behaviour. There’s a conscious effort to make credit accessible while remaining affordable and sustainable for customers. Building awareness around how credit actually works is just as important as extending it.
How much damage can a single missed EMI or credit card payment cause to a credit score? What is the typical recovery timeline, and what practical steps can consumers take to rebuild their score quickly?
Even a single missed payment can leave a mark, especially if everything else in your record has been clean. Once an account slips past 30 days overdue, it typically gets reported, and that stays visible for a while.
The positive side is that recovery is very much possible. What matters is how quickly you course-correct. Clearing dues, avoiding repeat delays, and being more mindful about utilisation can go a long way. In most cases, you start seeing improvement within a few months of disciplined behaviour.
We also see this as an area where guidance matters. Sometimes borrowers slip not because of intent but because of timing or planning gaps.
How do multiple hard enquiries affect a borrower’s credit profile? At what point do lenders start seeing enquiry behaviour as a red flag?
One or two enquiries don’t really change much. But when we see several applications coming in within a short span, especially for unsecured credit, it does raise a red flag.
The better approach is to be more deliberate, apply when there is a clear need, and space it out. As lenders, we are also increasingly mindful of guiding customers towards borrowing that fits their actual requirements and repayment capacity, rather than encouraging excess borrowing.
There has been a rise in “phantom loans” appearing on credit reports. How serious is this issue? What is the exact step-by-step process a consumer should follow to report and resolve such cases?
Instances of unfamiliar or “phantom” appearing on credit reports, while not widespread, are a serious concern as they can adversely impact a borrower’s creditworthiness if left unresolved. These cases may arise due to identity misuse, data mismatches, or reporting inaccuracies.
Consumers should take a structured approach to resolution:
- Identify and document the incorrect entry
- Raise a formal dispute with the credit bureau
- And notify the concerned lender at the same time
The bureau typically verifies the information with the lender, and upon confirmation, the erroneous entry is rectified. Prompt action is critical to minimise any potential impact on future credit access.
Credit report errors often lead to loan rejections. Where do these errors typically originate? What is the fastest and most effective way for consumers to get them corrected?
Most credit report errors are not intentional; they usually come from delays or inconsistencies in how data is reported. These issues largely originate from data reporting inconsistencies, including delays in updating loan closures or inaccuracies in account classification, both of which can materially affect a borrower’s credit profile.
The good part is that the correction process is now quite structured. Raising a dispute with the bureau initiates the process, and the bureau coordinates with the lender to validate and resolve the issue.
From a borrower’s perspective, regularly checking your report makes a big difference. It ensures that when you actually need credit, your profile reflects the right picture.
Recent data points to rising delinquencies in personal loans and credit cards. Do you see this as a temporary trend or a structural concern? What underlying behavioural shifts are driving this?
What we’re seeing right now appears more cyclical than structural. Over the last few years, access to unsecured credit has expanded quite rapidly, aided by digital channels and faster onboarding.
As newer segments enter the system, especially those without long credit histories, some volatility in behaviour is expected. The industry response has been to tighten underwriting, monitor portfolios more closely, and be more careful in loan approvals.
For individuals with no credit history, how do lenders assess creditworthiness?
For people without a credit history, the approach has evolved significantly. We are no longer dependent only on the bureau data. Things like bank transactions, income patterns, and cash flow behaviour are increasingly part of the assessment.
This gives a more rounded view of the customer and helps bring more people into the formal credit system.
The key is to do this without compromising on discipline. Expanding access is important, but equally important is ensuring that the credit being extended is appropriate for the customer’s financial situation and remains affordable over time.
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This article was taken from MintMoney and can be accessed