By When we are kids, our mental power is often determined by our grades, which makes no sense. But our financial strength is judged by the credit/CIBIL score when we grow up. Just like good grades are the tickets to great universities, in the same way, a good credit score is your breakthrough to getting financial help. Each of us will eventually require a loan for a planned expense or an emergency. So, it is essential to have a good credit score to receive instant loans for personal or business purposes.
What does a credit score mean?
A person’s ability to repay a loan is typically indicated by their CIBIL score, usually a three-digit number. For instance, a score of 600 is generally known as poor, a score of 750 as average, and a score of 900 as excellent. You can check credit score for free on the loan assistance apps.
What are the factors that contribute to your CIBIL score?
- Payment history (Weightage-35%)
It is an essential aspect of making up your credit score. Your credit history shows how meticulously you can fulfill your financial commitments by making on-time credit and EMI payments. Conversely, your credit health gets harmed, and your credit score is significantly reduced when you fall behind on credit card payments or do not repay loans within the allotted time. So you should always make payments on time if you don’t want to stain your credit score.
- Amounts Due (Weightage-30%)
You must clear the outstanding amount immediately, or it can hurt your credit report. There is a straightforward relationship between the due amount and the credit score. The less outstanding debt you have, the higher your credit score, and vice versa.
- Length of credit history (Weightage-15%)
The age of your credit history provides a clear picture of your financial strength. It makes sense that the bank gives its long-term customers credit quickly since they know they will pay it back indefinitely, unlike new customers with little or no credit history. Therefore, more extended credit history can help your credit score.
- Taking any new credit (Weightage-10%)
Even if you are denied or decide against the loan or credit card, keep in mind that inquiries will still impact your credit. Your credit report consults when you apply for a credit product by the lender. A complex search is another name for this action. When you submit multiple applications, your account receives numerous hard questions. It will impact your credit score and reveal your credit hunger. So, if your first credit application gets denied, give yourself some time before applying for the following credit product.
- What types of credit do you use (Weightage-10%)
If you responsibly use various credit types, including installment credit, available credit, and revolving credit, your score may rise. But, you do not necessarily need to have a broad range of credit to attain a good credit score.
All these factors make up your credit score, so pay close attention if you want to receive a loan smoothly. Use any financial apps to check credit score free to keep an eye on your credit score.
Always do a CIBIL score check and report before attempting to take a loan.
