A Brief Insight Into Credit Score Calculation

Credit or CIBIL score is one of the most potent indicators of credit behaviour of individuals and plays a crucial role in determining financial eligibility. Therefore, it is essential to know the process for the credit score calculation beforehand.

What is a credit score?

It is a 3-digit number that ranges between 300 and 900; higher the number, better the loan eligibility. In this regard, a score of 750 and above is considered to be a good score.

In India, there are several credit rating agencies like CIBIL that allow individuals to check their credit score online by logging on to their website.

Credit score also works as a deciding factor for loan approval, especially for the unsecured ones like a personal loan.

For this reason, prospective applicants need to know what constitutes this credit score.

Credit score breakup

Following are the factors that help in computing one’ credit report.

• 35% of your score includes payment history.
• 30% constitutes the amount you owe till the date.
• 15% of it depends on the length of your credit history.
• 10% of it is determined after assessing the variety of accounts that you have availed so far. For instance, a right mix of unsecured and secured loans help in improving this score.
• Current financial activity is another factor that contributes to 10% of this core.

Therefore, it is crucial to concentrate on improving your credit score to enhance one’s loan eligibility. Credit score calculation also allows individuals to assess where they have room for improvement.

Must Read: Things You Should Know About Credit Score Calculation