In order to obtain a good CIBIL score you need to maintain a good credit history, the details of which will show up in your CIBIL report. The CIBIL score can therefore be compared to a grade

or a rank based on how you have been servicing your credit.

Now that you know the link between your credit histories and credit score, you are naturally keen to do all you can to keep your CIBIL credit score as high as possible. But have you ever wondered what goes into the constitution of your CIBIL score? Here is a lowdown on the factors that have the greatest impact on your CIBIL score.

1. Your repayment history (35%): The first and most important thing that affects your credit score is your repayment history and accounts for 35 per cent of your credit score. You need to clear all your bills and loan repayments well within the dates stipulated in order to maintain a good repayment history. Even a single default has a negative impact on your score.

2. What you owe your lenders (30%): There are two basic considerations when it comes to calculating what you owe your lenders -- referred to as credit utilization. First, is the total of your credit card limits sanctioned to you and secondly the percentage of your money you are utilizing. Hence, your credit utilization ratio is calculated as balance outstanding on all your credit cards as a percentage of total credit limits on all your credit cards. If your credit utilization ratio is upward, your profile is considered to be "risky".

3. How long have you been servicing debt (15%): This may come as a surprise, but the amount of time for which you have been using credit also has an important bearing on your credit score? Therefore, if you have been servicing debt for a longer period and handling it responsibly, i.e. by making timely repayments etc., it is going to have a positive impact on your CIBIL score.

4. The amount of new credit you have taken or applied for (10%): Every time you apply for a new credit such as a loan, credit card etc., the banks and other financial institutions run an inquiry on your CIBIL report to check your credit history to find out about your financial health and repayment capability. If there have been too many such inquiries on your CIBIL report, it has a negative bearing on your credit score. This factor has a 10 per cent weightage when it comes to calculating your credit score.

5. The mix of credit (10%): Even though ours is primarily an EMI led generation, Indians are by nature averse to the idea of credit. So if you have been avoiding credit like the plague and have a single type of credit, you cannot have a good credit score, especially if you have only unsecured loans like credit cards or a personal loan. This factor has a bearing of 10 per cent on your CIBIL score. In order to score high on this ground, you must have a healthy mix of credit comprising of secured and unsecured loans and have ability to service them well in time. Those with a mix of various credit types such as mortgage, personal loan, car loan, credit card etc. is likely to score higher than those who have a single type of credit.

Now that you know what goes into the constitution of your credit score, you can use this information to find out the areas in which you are lagging and thus improve your credit score. A good credit score will ensure that you get a loan without any hassles at best interest rates when you really need one.
28th October 2016 From India, Ahmadabad
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