A better credit score can lower the rate you are offered, which cuts the interest on every loan. The example shows both a utilisation calculation and the cost of a 6-point rate gap.
Worked example: Ritika in Guwahati
Ritika is 25 and works as a salaried content analyst in Guwahati. She earns Rs. 60,000 a month and has had one credit card for 14 months, with a credit score of 705. Her card balance is Rs. 45,000 on a Rs. 1 lakh limit.
Utilisation = card balance ÷ card limit × 100. It shows how much of your available credit you are using, and a lower share supports a higher credit score.
| Item | Before (Rs.) | After paying Rs. 20,000 (Rs.) |
|---|
| Card limit | 1,00,000 | 1,00,000 |
| Balance on statement date | 45,000 | 25,000 |
| Utilisation (%) | 45 | 25 |
Last updated: 19th October, 2026
Ritika then plans a Rs. 2.5 lakh personal loan over 48 months (4 years). To see what her credit score is worth, she compares 2 illustrative rates.
EMI = P × R × (1 + R)^N ÷ [(1 + R)^N − 1]. P is the loan amount in rupees, R is the annual rate divided by 12 and by 100, and N is the tenure in months. The formula spreads the principal and interest into equal monthly payments, so early EMIs carry more interest and later ones more principal. All figures are rounded to the nearest rupee.
| Rate (% per annum) | Monthly EMI (Rs.) | Total interest (Rs.) | EMI as share of salary (%) |
|---|
| 13 | 6,707 | 71,930 | 11.2 |
| 19 | 7,475 | 1,08,801 | 12.5 |
Last updated: 19th October, 2026
The 6-point gap costs Rs. 768 more a month and Rs. 36,871 more in interest. The processing fee on Rs. 2.5 lakh is up to Rs. 10,325 either way. Ritika pays her card down first, so her credit score reflects 25% utilisation before she applies.
What can delay approval: a CIBIL score below 650 or existing EMIs that take up a large share of your income. Names or addresses that do not match across documents, and more than one loan application in the same month, can also slow it down. A strong credit score helps with the first of these.
