Factors considered while calculating your Credit Score
If you already didn’t know this and you are about to apply for a home loan or a credit card, make sure your Credit score is available. Do not treat your Credit report as just another document needed to process your loan. It is a three digit passport to smoothen the loan process and aid you in settling down in your dream home or buying a vehicle of your choice.
Now that you know that your personal loan eligibility is dependent on the three magic numbers credit agencies like CIBIL, Equifax or Experian, would you want to know how to remain in the green zone? Here is a brief on how your credit score could work for you:
What are the components of your credit score?
Your credit score ranges between 300 to 900 and your credit history is activated as soon as you avail a home loan or personal loan from a bank or financial institution. This implies that your credit handling behaviour will now be tracked and it will result in creating a final score that we all know as a “Credit Score”. Various aspects of your credit behaviour like Payment History, Credit Utilization, Credit Exposure and Credit Mix will have an impact on your credit score.
Past Performance/Repayment History: This is the largest component of your credit score and accounts for almost 30% of the total score. You can expect to score well in this area if you have made all your payments in time for credit card bills or loans taken currently or in the past.
Credit Mix or Loan Type: The duration of your credit history and the ratio of secured to unsecured loans taken by you, is the next component. It accounts for nearly 25% of the total score. You will score higher in this area when secured borrowings like home loans, education, loan against property or vehicle loans are more as compared to unsecured ones like personal loans or credit cards.
Credit Exposure: About 25% of your credit score is dependent on your credit exposure which implies the credit amount that has been extended to you. If there is high credit exposure over a small time period, it implies that you are living beyond your income and this can impact your score negatively.
Apart from this, many other factors like length of credit history, payment behaviour and utilization of credit form the rest 20% of your credit score. This is how your credit score is calculated by banks and other lenders.
Now that you know that your personal loan eligibility is dependent on the three magic numbers credit agencies like CIBIL, Equifax or Experian, would you want to know how to remain in the green zone? Here is a brief on how your credit score could work for you:
What are the components of your credit score?
Your credit score ranges between 300 to 900 and your credit history is activated as soon as you avail a home loan or personal loan from a bank or financial institution. This implies that your credit handling behaviour will now be tracked and it will result in creating a final score that we all know as a “Credit Score”. Various aspects of your credit behaviour like Payment History, Credit Utilization, Credit Exposure and Credit Mix will have an impact on your credit score.
Past Performance/Repayment History: This is the largest component of your credit score and accounts for almost 30% of the total score. You can expect to score well in this area if you have made all your payments in time for credit card bills or loans taken currently or in the past.
Credit Mix or Loan Type: The duration of your credit history and the ratio of secured to unsecured loans taken by you, is the next component. It accounts for nearly 25% of the total score. You will score higher in this area when secured borrowings like home loans, education, loan against property or vehicle loans are more as compared to unsecured ones like personal loans or credit cards.
Credit Exposure: About 25% of your credit score is dependent on your credit exposure which implies the credit amount that has been extended to you. If there is high credit exposure over a small time period, it implies that you are living beyond your income and this can impact your score negatively.
Apart from this, many other factors like length of credit history, payment behaviour and utilization of credit form the rest 20% of your credit score. This is how your credit score is calculated by banks and other lenders.
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