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The 5 Factors That Affect Your CIBIL Credit Score

What is CIBIL score meaning?

The most well-known of the Reserve Bank of India’s four credit information firms is the Credit Information Bureau (India) Limited (CIBIL). Three other companies have been granted credit information company licenses by the RBI. The three businesses are Experian, Equifax, and Highmark. The CIBIL score, on the other hand, is India’s most popular credit score. Let’s take a closer look at what a CIBIL score is.

CIBIL Limited maintains credit files on 600 million people and 32 million businesses. CIBIL India is owned by TransUnion, an American multinational organisation. As a result, in India, credit scores are known as the CIBIL TransUnion score.

The CIBIL Score is a three-digit numeric summary of your credit history, rating, and report that ranges from 300 to 900.

Because your CIBIL score is so crucial in the loan application process, you must be aware of the elements that influence it.

  • Payment History

The most crucial factor is your payment history. You are a responsible borrower if your payment history is spotless. Because the lender knows you’re a creditworthy borrower, he may offer you the greatest loan conditions and interest rates. As a result, make sure you don’t miss any payments.

Keep track of all of your monthly payments to ensure that they are made on schedule. Payment default has a negative influence on your CIBILTM ranking, even if it is a legitimate omission. You can use tools like auto-debit, standing orders, or NEFT mandates to ensure that monthly EMI payments are made on schedule. If you’re sending a check, make sure to send it well ahead of the due date to allow for the clearance period.

  • Ratio of Credit Utilization

The credit usage ratio is the percentage of credit you use compared to your overall credit limit. To maintain a healthy credit score, experts recommend keeping your credit utilisation below 30%. Lenders are wary of people who use more than 50% of their credit. For lenders, a large credit exposure signifies a higher credit risk.

  • Credit Combination

One of the most popular criteria used to compute credit scores is credit mix, or the diversity of your credit accounts. It’s also one of the least popular among customers. Multiple credit accounts, such as a mortgage, personal loan, and credit card, demonstrate to lenders that you can manage multiple types of debt at once. It also assists individuals in better comprehending their financial status and willingness to repay debt.

It also assists individuals in better comprehending their financial status and willingness to repay debt. While having a less broad credit portfolio does not necessarily mean you will have lower credit scores, the more credit kinds you have, the better (as long as you pay on time).Credit mix makes up 10% of your credit score and can help you achieve a high score and  to do that you should know How to Check Credit Score every end of the month.

  • You have many credit inquiries.

A high number of recent hard inquiries on your credit report will have a negative impact on your credit score. Multiple hard inquiries indicate that you are desperate for credit, making you a high-risk customer. When your credit limit is extended, it may signal an increase in your credit burden, lowering your credit score.

  • You have many credit inquiries.

A high number of recent hard inquiries on your credit report will have a negative impact on your credit score. Multiple hard inquiries indicate that you are desperate for credit, making you a high-risk customer. When your credit limit is extended, it may signal an increase in your credit burden, lowering your credit score.

What are some of the elements that have little bearing on your credit score?

While we’ve seen the most important aspects that affect your credit score, we should also learn about the factors that have little impact:

  • Income – Your direct earnings have little bearing on your credit score. Your CIBILTM score reflects your ability to handle debt rather than your earning potential. 
  • Bank Account – Your bank account balance has little bearing on your credit score. 
  • When it comes to determining your credit score, it doesn’t matter what type of job you have. Similarly, your credit score is unaffected by your age, marital status, or debit and prepaid cards.
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