What Are The Factors That Affect CIBIL Score?

Factors that Affect CIBIL Score

Having a good credit score is a key to easy and quick loan. The first thing that a lender will check is your credit score, when you apply for a loan. If you have a good credit score (a CIBIL Transunion score of over 750 is considered as a good) your loan application will go for further processing.  But if your credit score is on the lower side, your loan application will be rejected out rightly.

So, it is very important to have a good credit score. And remember that you can’t build a good credit score overnight as it is calculated on the basis of your credit history.

In order to build a good credit score you need to know the factors that affect your credit score.

Listed below are some of the factors that affect your credit score

Credit repayment history

Your repayment history is the most important factor affecting your CIBIL score. Any default on loans and credit card bill is likely to negatively impact your score. But if you have paid all your equated monthly installments (EMIs) and credit card bills on time, you will be rewarded with a better credit score.

Credit utilization limit

A high credit utilization limit over time gives a negative impression to your credit bureau and impacts your credit report negatively as it indicates your risng debt burden over time. Credit utilization is calculated by dividing your total outstanding amount with your credit limit. If your credit utilization is reducing over time or is low it shows that your  repayment burden is falling and it will help boost your credit score.

Multiple loan application

Whenever you apply for a new credit such as a credit card, loan etc., the bank or lending institution run an inquiry on your CIBIL report to check your credit history and score. Too many of such queries negatively impact your credit score as this may potray you as a credit hungry person. You will be seen as credit hungry, if you apply for loans simultaneously with more than one financial institution. Multiple loan application will indicate that your loan burden is going to go up in future and if may be difficult for you to service your future debt obligations.

Loan servicing term

The loan servicing term also has an impact on your CIBIL score. If you are servicing long period debt in a responsible manner by repaying the loan amount timely, it will have a positive impact on your credit score.

High percentage of unsecured loans

A high percentage of unsecured credit, such as personal loan and credit card expenditure is another factor affecting your CIBIL scores negatively. For many banks this is a sign of mismanagement of personal finance and they are wary of extending loan to such person(s). But, if you have more secured loans, the credit score is likely to go up.

Not checking your credit report for mistakes

It is necessary to check credit report every six months to rectify errors, if any. The delayed reporting’s or wrong reporting by banks may reflect faulty information on your credit report and reduce your CIBIL score.

Increase in credit limit

Frequent requests for a higher credit limit can also impact your credit score negatively. In this process, the bank asks CIBIL for your reports. And, this hard inquiry can hit your CIBIL score. Thus, requests for higher limit only when you really need it.

Giving guarantee for loan

Acting as a guarantor for a person’s loan will not affect your credit score negatively but if the person for whom you have given guarantee defaults or delays payment then your credit score will be impacted negatively.


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