How is a Cibil score calculated? All that you need to know
If you want to get a loan or credit card in India, your CIBIL score is one of the most important things that lenders look at. A CIBIL score is a three-digit number showing how trustworthy you are and how well you can repay loans. But how is a CIBIL score calculated? In this blog post, we’ll look at the factors that go into calculating a CIBIL score. If you don’t have any idea regarding Cibil Score then you should read what is Cibil Score.
Factors that affect your Cibil score
We all know how important a Cibil Score is for us to get any loan or credit card. So here we will discuss what things go into the calculation of the Cibil Score.
Payment History:
The most important thing that goes into your CIBIL score is how you’ve paid your bills in the past. This includes how many payments you’ve missed, how late they were, and if there are any defaults on your account. Lenders want to see that you’ve always paid on time, as this shows that you’re a trustworthy borrower.
Credit Utilization:
The second most important thing that affects your CIBIL score is how much you use your credit. This is how much credit you’re using compared to how much credit you have in total. Your credit utilisation ratio should be below 30% if at all possible. If your credit utilisation ratio is high, it shows that you use credit too much, which can be a red flag for lenders.
Length of Credit History:
The length of your credit history is another important part of how your CIBIL score is calculated. A good payment history over a longer period of time can help your score. This shows lenders that you have been a good borrower in the past.
Credit Mix:
Your CIBIL score can also go up if you have a good mix of credit accounts. This includes credit cards, personal loans, car loans, mortgages, and other secured and unsecured loans. Having a variety of credits shows that you know how to handle different kinds of credit in a responsible way.
New Credit:
Your CIBIL score can also be affected by how many new credit accounts you’ve opened in the past few months. When you apply for too many new credit accounts in a short amount of time, it looks like you’re taking on too much credit too quickly, which can hurt your score.
So these were the factors that go into when a Cibil score is calculated. Hope you properly understand how Cibil score is calculated.
Weightage of different factors in the calculation of Cibil score
When figuring out a person’s CIBIL score, several factors show how creditworthy they are taken into account. Different amounts of weight are given to each of these things, and here’s how they affect the total score:
- Payment History (35%)
- Credit utilization (30%)
- Length of credit history (15%)
- Credit mix (10%)
- New credit (10%)
Payment history and credit utilization are the two most important factors in determining your CIBIL score, accounting for a total weightage of 65%. Length of credit history, credit mix, and new credit each have a weightage of 15% or less.
In the end, if you know how is CIBIL score calculated, you can make better decisions about borrowing money. You should also know how to improve your credit score and make it easier to get loans or credit cards with good terms if you keep track of how you’ve paid your bills in the past, how much credit you’re using, what kinds of credit you have, and if you open any new accounts. Remember to be responsible with your credit, and your CIBIL score will go up quickly. Keep following Guest Blogging Pro for more such top-trending business blogs.
