6 things that are stopping you from achieving 800+ Cibil score
A credit score of 800 and over can help you get the best interest rates from lenders. A credit score below 600 can dim your chances of getting a loan, or getting it at a high interest rate. Missing equated monthly instalment (EMI) or the credit card bill can dent your Cibil score. But if you want to avail credit facilities such as a credit or a home loan, it is important to know the key factors that form your Cibil score.
Cibil score is important for credit facilities. It is a three digit number provided by Transunion that reflects your financial credibility and plays a significant role in getting loans, credit cards and other financial services. A credit score of 800 and over can help you get the best interest rates from lenders. A credit score below 600 can dim your chances of getting a loan, or getting it at a high interest rate. Missing equated monthly instalment (EMI) or the credit card bill can dent your Cibil score. But if you want to avail credit facilities such as a credit or a home loan, it is important to know the key factors that form your Cibil score. Raj Khosla, Founder & MD, MyMoneyMantra.com, tells about the 5 main factors that forms your Cibil score and can impact it.
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Payment History (35%)
Your payment history has influence on your credit score. It shows whether you have been paying your credit card bills, loan installments and other debts on time. Late payments, defaults or settlements can lower your score which is why making payments is crucial for maintaining a credit rating.
Credit Utilisation Ratio (30%)
This factor assesses how much of your credit you are using. A high utilisation ratio (using a portion of your credit limit) may indicate too much reliance on credit that may potentially lower your score. Its generally advised to keep your utilisation below 30 per cent of the limit for a rating.
Length of Credit History (15%)
The length of your credit history considers the age of all your accounts, including the oldest credit account and average account age.
Having a credit history is generally good for your CIBIL score since it gives information about your financial habits. It's beneficial to keep your oldest accounts open even if you don't use them often as this can have an impact on your score.
Credit Mix (10%)
It's always advisable to have a variety credit instruments like credit cards, personal loans and mortgages as it shows that you can handle all kinds of credit responsibly. However, having open accounts at once specially of the same type can be detrimental to your score.
New Credit Inquiries (10%)
Whenever you apply for a loan or new credit card it results in an inquiry on your credit report which may temporarily lower your CIBIL score. If there are inquiries within a short period, it might signal that you are overly eager for credit and could harm your score. It's advisable to limit the number of credit applications to maintain a score.
Outstanding Debt
The amount of debt on all your credit accounts is another crucial factor affecting your score. Having levels of debt across multiple lines of credit can lower your score as it indicates potential challenges in managing financial responsibilities.
Public records and legal actions have an impact on your CIBIL score. Bankruptcies, tax liens, or civil judgments signal troubles, and are not looked upon favourably by lenders. It's important to steer of troubles and address them promptly to keep your credit score in good shape.
Conclusion
In conclusion, your CIBIL score reflects your credit habits over time. By understanding and managing these aspects well you can build a credit history that makes it easier to access products with favourable terms. Keeping an eye on your credit report regularly and being responsible, with credit usage can help you achieve and maintain a good CIBIL score.