Having a good CIBIL score offers you several benefits while you apply for a new loan. It shows how responsible you are as a borrower. Your CIBIL score uses your credit history and repayment history to provide a comprehensive picture of your credit behaviour to the prospective lenders. A higher credit score makes you more trustworthy when it comes to taking a loan. To help you understand, how your CIBIL score is score is calculated, we are going to all about CIBIL score in detail. How your CIBIL score is calculated? There are a number of factors taken into consideration by credit rating agencies to calculate an individual’s CIBIL score- Repayment History- About 35% of your CIBIL score is calculated on the basis of your past repayment history. It is precisely the reason why defaulting a loan EMI or credit card payment severely affects your CIBIL score. Type of Credit Taken and Repayment Schedule The type of credit you have taken till now also plays an important role in deriving your CIBIL score. Only taking one type of credit doesn’t help you score good. Avoiding taking a credit altogether doesn’t help either. To create a good CIBIL score, you should maintain a good mix of credit types. It means you should take both secured and unsecured credits. Further, you should always pay the EMIs and bills on time as your repayment history makes about 10% of your score. Existing Debt and Credit Utilization Around 30% of your score is made by your existing debt and credit utilization. The same also reflects in your credit report. It is based on the amount lent to you by different lenders and how much of this amount has been utilized by you. Using too much credit or reaching to the limit of your credit card as compared to your income lowers your cibil score. Read Here : how to calculate home loan emi Number of Credit Inquiries Made by You Keep in mind that every time you apply for a credit or enquire about it, it reflects in your credit report. So, making credit inquiries in a short period can negatively impact your credit score. This is because, the credit rating agencies think that you are desperately in need of credit and as someone who can’t survive in his/her own means of income. Also, each credit rejection leaves a negative mark on your CIBIL score. So, if you are seeking a loan or a credit card, you should first check that if you meet the eligibility criteria or not before applying for one. To ensure you have a sound CIBIL score, you should check CIBIL score from time to time. It will also help you in spotting any errors in your credit report. Reporting them to the credit rating agencies will increase your credit score.
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Ajay Singh
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