Every person, once in a lifetime could be in need of financial resources whether it’s for your education or your kid’s education, buying a dream home or car, going on your dream vacation, family wedding, or medical emergency. Savings can help you in this financial situation but, what if you don’t have enough savings to utilize? What if you never saved money, what will you do in situations like these? On such occasions, loans can help you with the necessary funds to cope with the situation.
Approval of a loan requires a good CIBIL score calculation as most loans don’t need you to provide collateral. Lenders depend on the creditworthiness of the borrower which is based on their credit history. In this blog, you will learn about factors that may affect your CIBIL score calculation. You will also learn some useful tips to improve your credit score and how you can do CIBIL score calculation for free.
What Do You Understand CIBIL Score?
CIBIL score is also known as credit score. CIBIL was the first organization that used to generate the scores. CIBIL score, also known as a credit score. The higher score nearest to 900 represents the borrower’s excellent creditworthiness, whereas a score nearest to 300 is considered to be a lower score and highly risky. Most lenders prefer to choose borrowers with a higher CIBIL score calculation. A score of 750 and above is considered a good score and can automatically be cleared for a loan application.
How Can You Calculate Your CIBIL Score?
Credit score calculators are available online for free. You can search online for a free credit score check and check your credit score from the official site of the bank or any financial institution. Every company has its own method of calculating the credit score but some elements that do not change are past performance, credit type and duration, and credit mix. Your repayment history has a vital role in CIBIL score calculation. So, it is important to pay your credit card bills and loan EMI payments on time.
What Factors Are Affecting Credit Score Calculation?
Here are some factors affecting CIBIL score calculation:
- Repayment History
Your credit history or repayment history plays a vital role in calculating your CIBIL score. Delays in EMI payments, and credit card bill payments can severely affect your score. Paying your credit card bills and EMIs on time can help you maintain a good repayment history.
- Credit Utilisation Ratio
Maintaining a low credit utilization ratio is crucial for building a healthy CIBIL score. The credit utilization ratio is the percentage of your credit limit that you have used. Excessive use of credit can make you appear credit-hungry to potential lenders, hence it’s important to keep your credit utilization ratio low.
- Credit Mix
The number of credit accounts you have is called a credit mix. Your credit accounts can be classified as loans and credit cards. A healthy mix of credit products is important for maintaining a good score.
- Number of Hard Inquiries
Whenever you apply for a loan or credit card, the lender checks your credit report to assess your creditworthiness. This is called a hard inquiry, which stays on your credit report for up to 2 years. If you have too many hard inquiries in a short period of time, it can negatively impact your CIBIL score calculation as it may indicate that you are credit-hungry and may not be able to repay your debts. It is recommended to limit your hard inquiries and only apply for credit when necessary.
Tips to Improve Your CIBIL Score
Here are some useful tips that you can use to improve your credit score while CIBIL score calculation:
- Set reminders on your phone to remind you to make payments. It will help you make timely payments and prevent defaulting.
- Put a limit on your credit usage and avoid reaching your credit card limit as it may result in a lower credit score.
- Do not take too much debt at once. Make sure that the number of loans taken during a period is limited. Avoid taking another loan if you already have an existing loan.
Approval of a loan requires a good CIBIL score as most loans don’t need you to provide collateral. There are some factors that may affect your CIBIL score calculation. There are also some useful tips to improve your credit score and how you can do CIBIL score calculation for free. Check your credit score for free and apply for loans that are suitable for you. You can easily qualify for a loan approval if you have a good credit score.
Also Read:- How To Check Personal Loan Eligibility With A Low Salary?