Factors That Can Affect Your CIBIL Score
CIBIL Score is a way to determine the credit worth of the individuals on the basis of past patterns of credit usage and loan repayment behavior. But, it is essential to obtain those Factors That Can Affect Your CIBIL Score for every applier of loan or credit. Things That Impact CIBIL Credit Score are Repayment History, Credit Utilization, Loan Tenure, Multiple Loan Application, Percentage of Timely Payments, Search Frequency/Enquiries etc.
Credit Information Bureau (India) Limited collect and maintain payment records of both individuals and commercial entities pertaining to loans and credit cards on the basis of some crucial points. On the basis of factors they compose Credit Information Report (CIR) and credit score which help Bank and other financial institutions to know that how likely an individual is to default on his/her payments.
Factors That Can Affect Your CIBIL Score
CIBIL Score is way to approve or reject your loan application. You need to remember that you can’t build a good credit score overnight as it is calculated on the basis of your credit history. In order to build a good credit score you need to know the Things That Impact CIBIL Credit Score which are mentioned below for your comfort!!
- CIBIL Score comprise 35% weightage of Repayment history and it’s extremely important to make timely payments of your EMI and credit cards also.
- Every late payment and default, presented by the bank is also added in your score.
- Every time late payment of car loan, credit card, home loan or personal loan payment negative impacts on CIBIL Score.
- Exclusively for credit cards, it’s always a good idea to have your Credit Cards on Auto-Pay from your bank account so that you do not forget to make a payment.
- Alternatively, you can use MyMoneyKarma Financial Tools that will provide you with automated reminders on your upcoming bills.
- The most important factor of Credit Score is credit utilization with a weight of 30%.
- Credit utilization describes the percentage of available credit of the borrower’s.
- Higher credit utilization percentage is presumed as you trying to manage your credit and affects your credit score negatively.
- To have a good score utilize a max of 40 to 50% of your credit limit and make full payments before due dates.
- People must remember that how soon they repaid the loan, it will be better for their credit score.
- Therefore if you have a credit card and secured loans being repaid on time it will help you with your credit score.
- Due to incapability in loan payments, defaults or settlements with lenders affect your score negatively.
High Percentage Of Unsecured Loans:
- A higher percentage of unsecured loans like personal loan and credit card expenditure affect CIBIL scores negatively.
- High percentage of unsecured loan is mismanagement of personal finance and they are wary of extending loan to such person(s) but more secured loans help to go up your the credit score.
Multiple Loan Application:
- At the time of loan application or new credit such as credit card, loan etc., the bank or lending institution check your credit worth through CIBIL report.
- Too many of such queries negatively impact your credit score bad.
- To apply for loans simultaneously with more than one financial institution affect CIBIL Score.
- Multiple loan application will indicate that your loan burden is going to go up in future which show bad for your future debt obligations.
Percentage of Timely Payments:
- Higher percentage of one time repayments can affect your CIBIL Score.
- Repayment is one of the Factors That Can Affect Your CIBIL Score since a consistent pattern of timely payments represent a reliable borrower.
- Banks are reassured that there is a high probability that you will make payments on time.
- Even one or two late payments can have a negative impact on your credit score as it implies that you cannot be relied on to make on-time payments.
- Payment of EMIs, credit card bills and all other debts is a main factor to gain good score.
- Enquiries in very short period of time are also a factor that can affect your CIBIL score negatively.
- A hard enquiry is when a potential lender or credit card issuer accesses your CIR to determine whether you qualify for a loan.
- A single hard enquiry might only slightly diminish your credit score but multiple hard enquiries without corresponding loan approvals denote that you need credit and are applying to several lenders in order to maximize your chances of securing it.
- A large number of hard enquiries are another factor used to determine your score.
- Large number of enquiries/loan applications in a limited time frame can significantly decrease your credit score.
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