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.

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