A credit score is a very significant number that affects your financial life. This three-digit number decides if you can get a credit card or a loan of the desired amount and interest rates. A loan lender or a bank sees your credit score as a measure of your ability in paying debts and if you can be trusted to pay the debts of a loan amount you are asking for. Now there are a number of things that affect the credit score of an individual. Here are some of the major factors that affect the credit score
- Payment History
Your payment history is one of the most significant factors that affect your credit score. Your credit history is decided to be good or bad based on if you have made timely payments. Multiple late payments of EMIs or debts consistently will definitely reflect a negative effect on your credit score. So, make sure you repay any debts or EMIs on time.
- High Credit Utilization
The second most important factor affecting your credit score is having a high credit utilization score. If your credit card balance has increased recently, it indicates an increased financial burden on you. Ideally, your credit utilization rate should be less than 30%. The amount of debt tells the loan lender if you are or not a high-risk borrower.
- Account Mix
Lender checks on your ability to pay off debts in a mix of accounts. A well-balanced mix of secured loans namely, Home Loans, Car Loans, etc & unsecured loans can have a positive effect on your credit score.
- Multiple Inquiries
The rest of your credit score is contained in the type and number of credit inquiries. If you have recently been granted a lot of loans or credit cards, lenders will consider this happening due to the increase in the debt burden. This, in turn, can affect your credit score negatively.Ensure you are well-informed about what affects your cibil score and what doesn’t before you seek a loan. You can visit Finserv MARKETS to know more about your credit score.