A good CIBIL Score is essential when applying for a loan. This score represents your ability to repay a loan.
What is the CIBIL Score?
A CIBIL Score or credit score is a three-digit score ranging between 300 and 900. Your CIBIL Score is an important factor that lenders look at while evaluating your loan application. Therefore, it's important to know how the score is determined.
Your CIBIL score is important because it shows lenders if you are a dependable or a risky borrower.
Factors that impact your CIBIL Score
There are multiple factors that affect your CIBIL Score. Read on to understand more.
- Repayment history
Your repayment history is a record of all your payments made to your lender, it includes on-time, late and missed payments. This information helps the lender understand if you are a safe or high-risk borrower. It is a good practice to repay on time and not miss any of your EMIs.
- Credit enquiries
Every time you apply for a new loan or credit card, the lender raises an enquiry to check your credit information from a credit reporting agency like TransUnion CIBIL, CRIF, etc. Multiple credit inquiries in a short span of time have a negative impact on your credit score as it shows that you are credit-hungry.
- Length of credit history
Length of credit history refers to the number months since the time you have been using a credit card or taken a loan. It also factors in the average age of all your credit and loan accounts.
- Credit card utilisation
All credit cards come with a credit limit. Credit card utilisation refers to the amount of credit used against your credit card limit. Higher credit utilisation has a negative impact on your credit score since you are viewed as a high-risk borrower.
- Types of credit
There are two types of credit - secured (Gold Loan, Home Loan, Auto Loan etc.) and unsecured (Personal Loan, Credit Card). Having a healthy credit mix is essential in maintaining a good credit score.
Steps to maintain a good credit score
You can maintain your CIBIL Score by following some healthy credit behaviour such as
- Monitoring your credit utilization ratio
- Paying your EMIs on time.
- Avoiding multiple or frequent enquiries
- Checking your credit report regularly
- Maintaining a healthy and long credit history
- Getting a mix of credit (secured and unsecured)
To help you monitor and track your financial health regularly, Bajaj Finserv has come out with a Credit Pass. With this credit monitoring subscription, you can monitor the factors that impact your score, view your detailed credit report and unlock access to pre-approved loan and card offers.
