Know How Your CIBIL Score is Calculated
CIBIL score tends to play a significant role in helping financial institutions decide an individual’s creditworthiness. Typically, this three-digit score ranges between 300 and 900; while a score above 750 is considered to be a fair score.
Consequently, to track one’s CIBIL score effectively, individuals need to learn about the factors that influence the score. Further, they need to learn about how such scores are calculated. To begin with, they must note that one cannot check CIBIL score without login into an institution’s online profile.
Factors that influence CIBIL score
- Credit history
Credit history has the highest weightage in the calculation of CIBIL score, which is around 30%. It accounts for the previously borrowed debt, and the ease with it was repaid. Consequently, individuals with a fair credit history would have a healthy credit score as well.
2. Credit utilisation ratio
Typically, the credit utilisation ratio is the total debt taken against the borrower’s credit limit. Consequently, it has a weightage of 25% in the calculation of CIBIL score. An increase in this ratio tends to hamper credit scores significantly. Therefore, borrowers must make it a point to keep it within manageable limits.
Must Read: How Does a Personal Loan Impact Your CIBIL Score?
3. A mix of credit and tenor
A mix of secured and unsecured loans and their tenor have an aggregate weightage of 25% in the CIBIL score. Further, any delay in repayment or default, in general, tends to harm an individual’s credit score. Regardless, it must be noted that secured loans tend to have a fair impact on borrowers’ credit score if they manage and repay the same on time.
4. Number of loan applications and enquiries
Likewise, enquiring about one’s CIBIL score constantly with the same credit card within a short time harms credit scores significantly. Additionally, applying for multiple loans further aggravates the score and lowers it considerably.
Reference: Know How Your CIBIL Score is Calculated
