CIBIL score is a three-digit number that ranges from 300 to 900, and it represents an individual’s creditworthiness. It is used by lenders to determine the risk of lending money to an individual. There are several criteria used to check credit scores.

Key Factors Used In Determining CIBIL Score

Credit history

The credit history of an individual is one of the most important factors in calculating the CIBIL score. It includes the number of loans taken, credit cards, repayment history, and length of credit history.

Payment behavior

The payment behavior of an individual is also considered besides checking credit score. It includes the number of on-time payments made, late payments, and missed payments.

Credit utilization

The credit utilization ratio is the amount of credit used by an individual as a percentage of their total credit limit. A lower credit utilization ratio indicates responsible credit usage and can lead to a higher CIBIL score.

Credit mix

The credit mix refers to the variety of credit accounts an individual has, such as home loans, personal loans, and credit cards. A diverse credit mix indicates responsible credit usage and can lead to a higher CIBIL score.

Credit inquiries

Whenever an individual applies for a loan or a credit card, it is considered a credit inquiry. Too many credit inquiries within a short period can negatively impact the CIBIL score.

Defaults and settlements

Defaults and settlements can significantly impact the CIBIL score. A default occurs when an individual fails to repay a loan, while a settlement occurs when an individual negotiates to pay a lower amount than the actual amount owed.

Read also: Top 5 factors that Influence your Credit Score

Overall, a good CIBIL score indicates responsible credit behaviour and increases the chances of getting approved for loans and credit cards. It is essential not only to keep a check on credit scores but also to maintain a good credit score by ensuring timely payments, responsible credit usage, and avoiding defaults and settlements.