All About Credit Score

By Kavya Balaji | December 10, 2018

Don’t know much about Credit Scores and how they are calculated? Then, this post is for you!

We’re pretty sure you know that your Credit Score affects your eligibility for Loans. But do you know what exactly a Credit Score is and how it is calculated? We’ll tell you all about it.

What Is A Credit Score?

  • It is a three-digit score populated based on your past credit-related financial transactions.
  • It is used to decide whether you have the ability to repay loans on time.
  • Your Credit Score changes every time you make a financial transaction such as repaying your loan or getting a Credit Card.

How Much?

  • Credit Scores range between 300 and 900.
  • If you don’t have a credit history or your lender didn’t report your loan account, your score could be zero or NH.

Who Determines Credit Scores?

  1. Credit bureaus, such as CIBIL and Experian, come out with Credit Scores and credit reports.
  2. Credit bureau is a company that collects information from various sources, such as financial institutions, for providing credit information on individuals.
  3. Bureaus provide a Credit Score based on the information collected.
  4. Many lenders use Credit Score to assess the credit eligibility of individuals like you.

Additional Reading: How To Improve Your Credit Score Quickly

Your Credit Score

There are some factors that make up your Credit Score. These are the same ones that affect your Credit Score. They are:

  1. Payment History
    1. What is it? – This measures your on-time loan/Credit Card payments
    2. Weightage – High (35%)

How to score high – Make sure that you never miss out on a payment due date.

  1. Account Information
    1. What is it? – This is the outstanding balance on your loan/Credit Card
    2. Weightage – High (30%)

How to score high – For Credit Cards, your card utilisation ratio is calculated. This is the ratio of your purchases to your credit limit. The lower the ratio, the better your score. A new card or an enhanced credit limit can help achieve low card utilisation ratio.

  1. Age Of Credit Portfolio
    1. What is it? – The age of your Credit history. The higher, the better
    2. Weightage – Medium (15%)

How to score high – Holding on to your old Credit Cards can help. Use them for bill payments.

Additional Reading: Credit Score – Frequently Asked Questions

  1. Credit Enquiries
    1. What is it? – Count of hard enquiries made by banks to check your Credit Score
    2. Weightage – Low (10%)

How to score high – Check your eligibility before applying. This will lower your chances of rejection. You can check your loan eligibility for free on BankBazaar.com.

  1. Total Accounts
    1. What is it? – Number of loans and Credit Cards that you have. The higher, the better
    2. Weightage – Low (10%)

How to score high – Have a good mix of loans and Credit Cards.

The next time you find out that your loan application got rejected, just check your Credit Score. If it is low, don’t you worry coz you can always improve it. Want to check it right away? Go on, click the link below.

All information including news articles and blogs published on this website are strictly for general information purpose only. BankBazaar does not provide any warranty about the authenticity and accuracy of such information. BankBazaar will not be held responsible for any loss and/or damage that arises or is incurred by use of such information. Rates and offers as may be applicable at the time of applying for a product may vary from that mentioned above. Please visit www.bankbazaar.com for the latest rates/offers.
Category: Credit Score
Kavya Balaji

About Kavya Balaji

A personal finance professional with over 10 years of experience in financial research. She believes financial literacy is important and is passionate about sharing her knowledge on the subject.

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