There are various factors which affect your CIBIL score, here are some of the major ones:
- Track record of the payment: The Credit Information Rate will keep a record of all your loans, credit cards usage and repayment history; it will also keep a track in case there is a default or a delay in payments, based on which your credit score will be calculated. You need to remember that loan repayments contribute about 35% of your score, so it is very important to pay your EMIs and bills before the due date. If there is any delay or of there is a default, it will have a negative impact on your credit score. It indicates that you had difficulty in servicing your loan.
- Good Credit Mix: Your credit mix contributes about 10% towards your credit score. If you are servicing multiple loans, make sure you have a good mix of secured and unsecured loans. Your ideal ratio should be 80% of secured loans and 20% of unsecured loans. If you have one type of loan then your credit score might not be ideal and the lenders will consider it as a risk.
- How long have you been servicing debt: The time period for which you have been using credit is another important factor as it contributes about 10% of your credit score? If you have been using servicing debt for a longer period of time then it will have a positive impact on your CIBIL score as it means you have been responsible enough to make timely payments. The longer the time period the better it is for your credit score.
- Credit Utilization: When it comes to credit utilization you need to remember two things, one is your credit limit and the other is the amount you are utilizing. Always remember not to use 100% of your credit limit, it will lower your score. It is advisable to use only 30% – 40% of your total credit.
- Closing your Credit Cards: It is a general misconception that if you close your credit card, your credit score will improve. Think of this; if you had a credit card for a long time and had been paying the dues on time, it will have a positive impact on your credit score. So don’t be in a hurry to close your credit card.