Factors that affect credit score

Here are the five most important factors that can affect your credit score and their significance when applying for a loan.
Factors that affect credit score
2 min read
18 Oct 2022

Every lender checks your credit score when you apply for a loan or credit card. Having a high credit score above 750 is essential in order to get your loan application approved.

What is a credit score?

A credit score is a three-digit score that reflects your creditworthiness. It ranges between 300 and 900. It is provided by credit bureau agencies such as TransUnion CIBIL, CRIF High Mark, and Experian. Your chances of quickly getting a loan or credit card increase if you have a higher score.

Check your CIBIL score for free

Factors that impact your credit score

Your credit score is calculated based on five different factors. This article will discuss these primary factors and how they impact your credit score.

  • Repayment history
    Your repayment history is a record of all your payments made to your lender, it includes on-time, late and missed payments. This information helps the lender understand if you are a safe or high-risk borrower. It is a good practice to repay on time and not miss any of your EMIs.

  • Credit utilisation
    All credit cards come with a credit limit. Credit utilisation refers to the amount of credit used against your credit card limit. Higher credit utilisation has a negative impact on your credit score since you are viewed as a high-risk borrower.

  • Length of credit history
    Length of credit history refers to the number of years or months since the time you have been using a credit card or taken a loan. It takes into consideration the time since you opened your first loan account. It also factors in the average age of all your credit and loan accounts.

  • Types of credit
    There are two types of credit - secured (Gold Loan, Home Loan, Auto Loan etc.) and unsecured (Personal Loan, Credit Card). Having a healthy credit mix is essential in maintaining a good credit score.

  • Credit enquiries
    Every time you apply for a new loan or credit card, the lender does an inquiry to check your credit information from a credit reporting agency like TransUnion CIBIL, CRIF, etc. Multiple credit inquiries in a short span of time have a negative impact on your credit score.

With our Credit Pass, you can get insights into the factors that impact your credit health. You can check your credit score anytime, get your personalised credit dashboard, and access tools. To get your Credit Pass today, click the below link.

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