A credit score is a three-digit number that lenders use to determine a borrower’s risk of lending money. The credit card company, car dealer, and a mortgage banker is one type of lender that will check your credit score. This is done before deciding how much money they are willing to lend you and at what interest rate. Insurance companies and homeowners may look at your credit score to determine how financially responsible you are, before taking out an insurance policy or renting an apartment.
What Is CIBIL Score?
The CIBIL score is a three-digit score that assesses a borrower’s creditworthiness. It ranges from 300-900, and higher scores are considered better. All lenders will check your credit score before approving your loan.
Factors That Affect Credit Scores:
There are some important factors that affect credit scores.
Debt Payment History:
Your repayment history is an important part of all the EMI and credit card bill payments you have made. This has a major impact on your credit score. The more regular your payments, the better. The higher your score, the higher your score. Therefore, you should always pay your EMIs and credit card bills in full by the due date.
Credit Utilization Ratio (CUR):
Your credit utilization ratio refers to the percentage of credit you use of the credit available to you. Ideally, you should keep your CUR below 30%. Having a high CUR can make you appear overly reliant on credit. A low credit utilization ratio affects your credit score in a positive way and you are more likely to be approved for a personal loan app.
Credit Age:
Credit age is the total amount of active credit history you have. A longer credit history helps lenders trust you more. Therefore, you should be very careful when closing old credit card accounts. Don’t close your old credit card and try to keep it up and running by making small purchases and paying your bills on time.
Number of Inquiries:
Whenever you apply for a credit product, Lenders will check your credit score. This is called a hard pull and shows it in the “Inquiries” section of your credit report. Too many credit inquiries will affect your credit report and your credit score. To avoid this problem Avoid applying for too many credit cards or loans at the same time.
Mixed Credit:
Good credit mix including credit cards Secured loans and unsecured loans has a positive effect on your credit score. It shows lenders that you can responsibly manage a wide range of urgent personal loan products. A combination of good credit and timely repayments is one of the key factors affecting a credit rating.
Status Of Old Loans:
Any old loans that are in ‘settled’ status or have not been closed can have a negative impact on your CIBIL score. In case you have an old loan that has not been paid in full or has not been paid in full. You may consider contacting your lender and paying the fees. After that, you can request that the loan be closed.
Errors on Your Credit Report:
Sometimes your Credit Company or lender makes mistakes when reporting your payments or credit status. These things can have a negative effect on your credit score. You need to check your credit score regularly for discrepancies. If you see anything you should report any disputes and resolve them.