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What Factors determine your credit score

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What Factors determine your credit score

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  1. 5FACTORSTHATAFFECT YOUR CREDITSCORE

  2. Whatfactorsthatdetermineyourcreditscore? Ifyouhaveeverusedacreditcardorappliedforaloan, yousureknowwhat acreditscore means, both–toyou andtothe lender!Acreditscoreis a three-digitnumber whichgives abankoralender asenseofthe consumer's orbusiness's creditworthinessi.e. whethertheborrower hasbeenrepayingtheduesregularlyor not.creditreport is asummaryofyourcredithistory. If the credit score is good, then the lender understands that the borrower has used loans or credit cards in the pastandhas repaidallthe duesproperlyandregularly. This makes the lender comfortable to approve the applicationfora loanorcreditcard. In India, thecreditscorerangesbetween300–900. 300 is thelowestscoreindicatingriskiercustomerfora bank and900 is thehighestscoreindicatingthebestpossible customer for a bank. A scoreabove 700 isgenerally consideredgood.

  3. Therearefivefactorsthataffectyourcreditscore Payment History CreditMix Lengthof Credit History Credit Utilization Ratio Outstanding debt

  4. Payment History Themostimportantfactorwhilecalculatingyourcreditscoreis paymenthistory.Itisimportanttopayyourcreditcardbillsand loanEMIsontimeeverymonth.Anymissed oroverduepayments, hampersyourscore andsuggeststhat youarenot consistentwith repayingcredit. • CreditUtilizationRatio Thecreditutilizationratio istheamountof creditusedin proportiontoyourcreditlimit.Ittells aboutyourtotalcreditlimit andhowmuchyou’veusedtillnow.Ideally,thisratioshould remainwithin30%ofyourcreditlimit.Forexample,ifyourcredit cardlimitis 1lakh,you shouldspend undera capof 30,000/-The lesscredityouuse,thebetterwillbeyourscore.

  5. Outstandingdebt Thisis theamountyouowetothe lender.You shouldalways make sureto clearoff youroutstandingdebts. Whenyou haveunpaidduesreflectedonyourcreditreport,ithasa significantcontributiontoyourcreditscore. • LengthofCreditHistory Thisiscountedfromthedate ofyourfirstcreditsanctioned. The olderyourcreditage, thebetteritwillbeforyourscore. It isoftenadvised to ownacreditcardrightatthebeginning of yourlifewhenyouare financiallymoresecureandableto repayontimeasthiswillbuilda solidcredithistory andwill eventually helpyoubag aloanlaterinyourlifewhenyou needit.

  6. CreditMix Yourcreditaccountshouldbeamixof secured(autoloans,home loansetc)andunsecuredloans. (Creditcard)Itisimportantto maintaina healthybalanceofsecuredandunsecuredloans.

  7. It is important to check your Credit score from timeto time. Youcan getyouronlinecredit scorehere https://cir.crifhighmark.com FollowCRIFIndiaon: /CRIFINDIA

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