Top 5 Factors Affecting Your CIBIL Score

The CIBIL score is an important aspect of maintaining a good financial history. It’s a three-digit number ranging from 300 to 900, which reflects an individual's creditworthiness. A high score indicates good creditworthiness and a low score indicates poor creditworthiness. These are the top 5 factors affecting your CIBIL score so that you can understand what you need to do to maintain a good score.

5 Factors Affecting Your CIBIL Score

  1. Payment History

  2. Credit Utilization Ratio

  3. Length of Credit History

  4. Credit Mix

  5. Credit Enquiries


1. Payment History

One of the most significant factors that affect your CIBIL score is your payment history. It represents how well you have handled your previous loans and credit card bills. Late payments and defaulting on loans can severely hurt your score. Even one late payment can reduce your score, and if you have a history of late payments, it can seriously impact your credit score. The more recent the default, the more the impact on your score. Therefore, it’s key to ensure that you pay all your bills and loans on time.

Also Read: 5 Financial Institutions For Business Loans In India

2. Credit Utilization Ratio

Credit utilization ratio is the percentage of credit limit utilized by an individual. Using most of your credit limit indicates that you are over-reliant on credit, and this negatively affects your CIBIL score. Ideally, the credit utilization ratio should be less than 30% of the credit limit available to you. So, it’s recommended to use only the required amount and not to exhaust your credit limit.

3. Length of Credit History

Another factor that affects your CIBIL score is the length of your credit history. A long and consistent credit history shows the ability to manage credit well. On the other hand, a shorter credit history makes it difficult for lenders to assess your creditworthiness. Therefore, it’s advisable to maintain credit for a longer period of time to build a good credit score.

4. Credit Mix

Credit mix is the types of credit an individual has, such as personal loans, home loans, credit cards, etc. A good mix of credit shows that an individual can manage different types of credit well. A healthy credit mix is considered to be good for your CIBIL score as it suggests that you’re responsible in managing different types of credit.

Also Read: Loans 101: A Comprehensive Guide To Different Types Of Loans And What You Should Know About Them

5. Credit Enquiries

When a lender checks your credit report to assess your creditworthiness, it’s called a credit inquiry. So, each time you apply for a loan or credit card, the lender's inquiry is recorded in your credit history. Multiple inquiries over a short period indicate credit hunger and negatively affect your CIBIL score. It suggests that you’re not able to handle your finances well and rely too much on credit.

Summing Up

Maintaining a good CIBIL score is essential in today's world. By being mindful of these factors, you can improve your score and keep it healthy. It’s imperative to always pay your bills on time, maintain a low credit utilization ratio, maintain credit for a longer period of time, diversify your credit mix, and avoid unnecessary credit inquiries. Following these steps will help to keep your financial history sound.

Comments

Post a Comment

Popular posts from this blog

Ways To Maximize Return On Assets (ROA)

Image
When it comes to navigating the complex world of finance, one key metric that deserves your attention is Return On Assets (ROA). If you’re interested in finance, you must be already well aware of the importance of optimizing ROA for businesses. But today, we'll dive into some practical strategies that can help you maximize ROA and boost your financial performance. Understanding ROA Before we jump into the strategies, let's quickly recap what ROA is. It is a crucial financial ratio that measures a company's ability to generate earnings from its assets. While also indicating a business's efficiency and profitability. ROA is calculated by dividing a company's net income by its total assets. The result is expressed as a percentage. If the financial performance of a company is to be improved, it is very important to maximize its return on assets. There are a number of ways in which it can be done -  1. Cost Control And Margin Improvement Controlling costs is another vita
Read more

The Role Of Non-Banking Financial Companies In Venture Debt Financing

Image
Startups, the lifeblood of innovation and economic growth, often face a common challenge: securing adequate funding to fuel their ambitions. While traditional bank loans and equity financing remain popular options, a lesser-known yet increasingly prevalent alternative has emerged: venture debt financing. In this article, we'll delve into the realm of venture debt financing and explore how non-banking financial companies (NBFCs) are empowering startups on their journey to success. Understanding Venture Debt Financing Venture debt financing, as the name suggests, involves providing debt capital to startups and high-growth companies. Unlike traditional bank loans, venture debt is typically structured to complement equity financing rounds rather than replace them entirely. This form of financing offers startups access to additional capital without diluting existing ownership stakes. Also Read: Abhay Bhutada Shares Insights on Poonawalla Fincorp’s Long-Term Objectives How Venture Debt W
Read more

A Roadmap Using Risk Asset Acceptance Criteria for Quality Enhancement

Image
In the dynamic landscape of finance, understanding the nuances of risk asset acceptance criteria becomes paramount, particularly when it comes to shaping the quality of assets. Abhay Bhutada, a voice of authority in the financial realm, sheds light on the significance of these criteria in ensuring robust asset quality. Understanding Our Segment Abhay Bhutada, Poonawalla Fincorp’s MD sheds light on the importance of comprehending the specific segment within which an organization operates. Lower ticket personal loans may dominate discussions, but Bhutada underscores that their focus lies elsewhere. Operating in the top quartile of the customer segment, their clientele boasts a credit score of 700 plus, a clean repayment track record, and an average ticket size exceeding Rs 1 Lakh. The Strength of Risk Asset Acceptance Criteria The bedrock of their success lies in a robust Risk Asset Acceptance Criteria. This stringent set of parameters ensures that the borrowers in their portfolio are c
Read more