What Really Goes Into Your CIBIL Score?
CIBIL takes five major factors based on your credit history in which to compute your score. Being aware of every factor will make you know what is contributing to your score or what is not, and make educated decisions to improve it.
Factor 1: Payment History
Any payment history will be the most important in calculating your score. Regular payments of EMIs and credit card bills would create a wonderful score, and missed/late payments create an indelible negative score on your credit history.
Factor 2: Credit Utilisation
Credit utilisation is a ratio of the percentage of the available credit limit you are using. Having a credit utilisation of less than 30 percent is an indicator to lenders of financial discipline, and with time, it will add up to a healthier and higher CIBIL score.
Factor 3: Length Of Credit History
The longer the credit history is, the more information the lenders have to evaluate your repayment behaviour. Maintaining credit accounts in good standing for as long as possible in good health contributes to the improvement of the CIBIL score. Because it shows that the credit management is committed and responsible in the long term.
Factor 4: Credit Mix
Credit mix is the term used to refer to the types of credit that you have in your portfolio. Such as home loans, personal loans, and credit cards. Having a diverse mix of credits with no negative marks shows. That you are capable of using various forms of credit in a responsible manner and will improve your CIBIL score.
Factor 5: New Credit Applications
Each new credit request results in a hard inquiry on your credit history that temporarily reduces your CIBIL score. Applying several times to various lenders in a short time will create the impression of financial distress among the lenders, and it will reflect badly on your overall creditworthiness.
The Interaction Of These Five Factors
The CIBIL score is an integrated output of the payment history, credit utilisation, credit history length, credit mix and new credit applications. There is no single factor that functions independently. And consistent improvement across all five factors over time gradually raises your score.
Boost Your CIBIL Score Today
Pay bills, maintain credit utilisation of less than 30 per cent, maintain older accounts, diversify your credit mix and limit new credit applications. The combination of responsible behaviour in all five factors is the surest way of achieving a high CIBIL score.
Disclaimer: The information provided on this website is for general informational purposes only and should not be considered financial or legal advice. Please consult with a qualified financial advisor before making any decisions.
