A credit score is an important factor that is evaluated by the loan provider at the time of screening a loan application. Borrowing is easy with a good credit score. If you are planning to take a high-value loan like a home or car loan, you need a good score. A credit score represents your financial health. Based on your credit score, your credit eligibility is judged and represented. It becomes easy for loan providers to approve the loan application based on the CIBIL score. There are various aspects of credit scores that are important to take note of. Here’s all you need to know about your CIBIL score check and how it is calculated.
What is a credit score?
A credit score is a three-digit number
that represents your entire credit health. It considers past repayment history,
loan repayment, credit utilisation ratio, credit mix, credit account and
payment. An individual with a good credit score finds it easy and affordable to
take out any kind of loan from a financial institution. Loan providers consider
credit score to be an important factor in loan approval or denial. Learn How to
calculate business loan by using business loan
calculator.
What are the factors that calculate your credit score?
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Payment: Payment is a vital
factor that calculates the credit score. It takes around 25% of the entire
credit score. It is important to maintain a clean track record in order to get
a good credit score. Payment delays are taken into account and damage your
credit score.
●
Credit accounts, such as loans
and credit cards, play an important role in your credit score.Any activity that
takes place in your credit account will be considered when calculating your
credit score. If you do not pay bills on time and keep them outstanding, your
credit score will dip.
●
Credit Age: Credit age is an
important factor that is considered when calculating your credit score. The
older you are, the lower your credit score will be.credit age, the better your
credit score is. It is important to keep your credit accounts open with a
long credit history, even if you have stopped using them. For example, a credit
card with a long credit history is good for building your credit score.
●
Credit utilisation ratio: Among
the other two factors, the credit utilisation ratio is the most important.It is
vital to keep your credit utilisation ratio below 50%. You can not completely exhaust
your credit limit that has been offered to you by the financial institutions.
Summing up
Achieve your financial goals with a
good CIBIL score. There are various
digital platforms that offer free CIBIL
score check options. Track your score and improve it for a better borrowing
experience.
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