How to Calculate Your Credit Score

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Your credit score is calculated by TransUnion Credit Information Bureau (India) Limited (CIBIL), the primary agency. It gives a score between 300 and 900 using sophisticated analytical techniques. It is simpler to obtain quick loans with competitive interest rates if your credit score is closer to 900. The majority of lenders are willing to lend you money if your credit score is higher than 750, despite the fact that each financial institution has a different cut-off. However, lenders take into account a number of other factors when approving your loan application, so having a high credit score does not guarantee its approval.

1. Credit history

The financial record holds 30% weight-age in the computation of your score. Banks and non-banking monetary organizations (NBFCs) give your own and credit-related subtleties to the credit authority. The financial institutions provide the bureau with a report, which the bureau then compiles. For the past three years, CIBIL has kept track of your monthly payments toward your EMIs and bills.

The status of all of your accounts, including whether they have been settled, written off, or remain unpaid, can be found in your credit report. It keeps track of the number of days since the due date in the event of delays. As a result, having missed or defaulted on a payment has a negative impact on your credit score.

2. Credit mix

The components of your loans, such as the number of secured versus unsecured facilities, affect the CIBIL score. Your overall score is 25% influenced by your credit mix.

Your credit score will be impacted negatively by any delay or default, regardless of whether the instant loan is secured or unsecured. However, even if you have paid your bills on time, your score will be lower if you give unsecured loans more weight. On the other hand, your credit score will rise if you pay back secured loans on time.

3. Credit utilization

The ratio of how much you have borrowed to how much you might be eligible to borrow is known as your credit utilization percentage. In addition, credit utilization accounts for 25% of the total credit score.

Your credit limit and the amount you have actually borrowed are required for credit utilization. The credit bureau has a negative perception of higher utilization over time because it indicates that your burden is growing over time.

4. Others

The quantity of advances you have applied for during the new past holds 20% weight-age in your all out financial assessment. This is reflected in the report’s Enquiry section. The credit bureau views you negatively if you have made multiple inquiries.

The credit report not just effects on your capacity to benefit of simple advances yet additionally influences its agreements. On the off chance that you have a higher score, there is a higher chance of endorsement with ideal terms. Before applying for a loan, whether online or in person, you should check your score to avoid being turned down because of a lower score.

Article Source: http://EzineArticles.com/9997448

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