When you look to avail loans, one of the most common eligibility requirements which you find is a good credit score. Lenders offer you a loan only if your score is 650 or 700 and above. The higher the score the better deals can you find on the loan. The Cibil score depicts your creditworthiness and tells the lender the possibility of repayment of the loan.
While many of you know that a good credit score is needed, what you might not know is the fact that there are some factors which affect your credit score. If you know these factors and how you can influence them, you can improve and build a good credit score. So, here are five of the most important factors which affect your credit score –
- Repayment history
The repayment history of your existing debts influences the major part of your credit score. It contributes to 35% of the score. That is why to improve your score you should always pay your liabilities on time.
2. Credit utilization
This is the second most important component of your score contributing to 30% of the score’s calculation. Credit utilisation means the credit which you have availed against the total credit limit available to you. If utilisation is high, the score is bad and vice versa. You should, therefore, have a high credit limit and lower debts to improve your score.
3. Credit history
The history for which you have been utilising credit is also taken into account when calculating your credit score. No credit history has a bad effect on the score and having a clean history of several years has a good impact. So, if you don’t have credit, start using it and maintain your credit over longer periods to have an improved credit score.
4. New credit
Having too much new credit is bad for the score. There should be a time gap between multiple credits which you have availed. So, avoid taking too many loans or credit cards in a short period of time for a good score.
6. Credit mix
Lastly, your credit mix also determines your credit score. Having a mix of secured and unsecured credit is good for the score. Too much of unsecured credit is bad and should be avoided.
Other factors
Besides these important factors, there are other factors too which impact your score. These are as follows –
- Acting as a loan guarantor- If the loan is defaulted upon, your score would suffer. So, avoid acting as a guarantor for others’ loans
- Settlement of loan – settlement of loan means writing off the loan by paying a lump sum amount. This is very bad and hampers your credit score for many years. It should, therefore, be avoided.
- Closing credit cards – this lowers your credit limit and increases your credit utilisation so you should not close your cards
- Reviewing the score – you should review your credit score regularly to maintain and improve it.
So, these factors should be kept in mind and you should use them to improve your credit score.
Related Article: Guide To Read And Understand Your CIBIL Report
I want to use this medium to express gratitude to Direct Access Online service for fulfilling his promise by granting me a loan, i was stuck in a financial situation and needed to refinance and pay my bills as well as start up a Business. I tried seeking for loans from various loan firms both private and corporate organisations but never succeeded and most banks declined my credit request. "if you must contact any firm with reference to securing a loan online with low interest rate of 3% and better repayment plans/schedule. You can contact them via email on { directaccesservice@gmail . com } or whatsapp @ +15754148400
ReplyDelete