Your credit score is the first thing that a lender will check when you apply for a loan or a credit card. Having a good credit score is the key to getting your loan request approved quickly. Your credit score is calculated after evaluating a number of factors. There are 4 major factors as explained below:
Top 4 Factors that contribute to Your Credit Score
1. Credit Repayment History
This shows how consistent you are in making timely payments. If you’re paying your instalments on time, your credit score is likely to boost up as this is the most important factor of your credit score.
2. Credit Utilization Ratio
It tells about your total credit limit and how much you’ve used till now, i.e. how much you owe. The less credit you use, the better your score will be. It is advisable to maintain the credit utilization ratio below 30%. However, a high credit utilization ratio occasionally would not have a very serious impact on your credit score.
3. Errors in your CIBIL Report
Errors in your CIBIL Report such as an incorrect mention of default in repayments, errors in active loans/credit cards reported, etc. may adversely affect your CIBIL Score. Ideally, you should regularly check your credit report and raise a CIBIL dispute to rectify errors, if any, at the earliest.
Also Read: Why you Should Check your Credit Score regularly?
4. Credit Age
This is counted from the date of your first credit (credit card or loan) sanctioned. The older your credit age, the better it will be for your score.
A person having a credit account of 3 years old or more will be preferred over someone who is comparatively new in the credit market.
NOTE: You can also avail Paisabazaar’s ‘ Credit Advisory Services’ which will help you to understand your credit report in detail. In case you have no credit history, it will help you build your credit score from scratch . Through credit advisory, you will be able to understand the factors affecting the credit score better and will get perfect guidance in improving your credit score significantly over the course of time.
