How crucial it is to have a good credit score in today's world cannot be overstated. Your credit score plays a vital role in determining your financial well-being. CRIF credit score is one of the significant metrics used by lenders to assess your creditworthiness, making it essential to understand the factors that can influence it.
Payment history
Your payment history is the most significant factor that affects your credit score. Making timely payments for your loans and credit card bills showcases your reliability as a borrower. A consistent record of on-time payments can positively impact your credit score, while late or missed payments can severely damage it.
Credit utilisation ratio
The credit utilisation ratio is the percentage of your available credit that you are currently using. To maintain a healthy credit score, it is advisable to keep this ratio below 30%. High credit utilisation indicates a heavy reliance on credit, which may raise concerns about your ability to manage debt.
Credit mix
A diverse credit mix can have a positive impact on your credit score. Lenders prefer to see a balanced blend of secured (e.g., home loan, car loan) and unsecured credit (e.g., credit cards, personal loans). However, it is crucial not to take on unnecessary credit just to improve your credit mix.
Length of credit history
The length of your credit history plays a role in calculating your credit score. A longer credit history provides more data for lenders to assess your creditworthiness accurately. If you are new to credit, building a positive credit history over time will help boost your score.
Credit enquiries
Each time you apply for new credit, a hard enquiry is made on your credit report. Multiple hard enquiries within a short period can raise concerns for lenders, as it indicates an increased risk of financial distress. Try to limit credit enquiries and only apply for credit when necessary.
Now that you have a better understanding of the factors that can influence your credit score, it is time to take control of your financial health. By being diligent with your payments, maintaining a healthy credit mix, and avoiding financial mistakes, you can improve your creditworthiness.
Remember, establishing a positive credit history takes time and discipline, so be patient. And if you need some help building a solid credit history, look no further than the Bajaj Finserv Credit Pass. It provides a tailored experience that offers you monthly updates on your credit score and credit health monitoring in real time. The Credit Pass focuses on helping you improve your CIBIL Score. By using Credit Pass services responsibly and managing your finances prudently, you can pave the way to a promising financial future.
