If financial freedom is a priority for you, understanding the importance of creditworthiness is essential. Your creditworthiness reflects how viable and reliable you are as a borrower, and it is measured by your CIBIL Score—a three-digit number that holds significant sway in determining your financial prospects..
In this guide, we will explore the factors that influence your creditworthiness, learn how to maintain a strong credit profile, and understand how you can know your CIBIL Score.
Understanding Your CIBIL Score
A person’s creditworthiness is measured by a three-digit number known as their CIBIL or credit score. Payment history, credit use, credit history duration, credit mix, and new credit inquiries are all considered in the calculation. Creditworthiness is measured on a scale from 300 to 900, with higher scores signifying better standing. Credit Information Bureau India Limited (CIBIL) maintains and furnishes this information to citizens, who can get a free report once a year. Or they can sign up on new-age apps like OneScore and check it for free whenever they like.
Importance of a Higher CIBIL Score
Lenders look closely at your CIBIL score when deciding whether or not to extend credit when you apply for a loan or credit card. A better score improves your ability to get these financial products on good terms, including low-interest rates and significant credit limits.
How Various Factors Impact Your CIBIL Score
Knowing what affects your CIBIL score is the first step in taking measures to improve it. CIBIL takes into account the following factors:
Table of Contents
● Payment History
Your CIBIL score relies heavily on your past payment history with regards to outstanding bills and other debt. Your score improves when you pay your bills, and EMIs on time and falls when you pay late or default.
● Credit Utilisation
The factor to consider here is how much of your total available credit you currently use. A credit usage ratio of under 30% is recommended as the proper use of credit.
● Length of Credit History
The amount of time you’ve been using credit is also an important consideration. A higher CIBIL score can result from responsible credit management over an extended period.
● Credit Mix
Having various credit accounts (loans, credit cards, etc.) shows you can handle credit in various ways. Your CIBIL score may benefit from a well-balanced portfolio.
● Recent Credit Inquiries
The CIBIL score can take a hit if you make a lot of credit inquiries in a short period. So it is recommended to make credit check requests only when necessary.
Know Your CIBIL Score on the Spot
You can know your CIBIL Score by getting a CIBIL Report from CIBIL itself or go with the likes of the One Score App for easy access to. Follow these steps after installing the app from your device’s app store:
- Create account: Create an account by filling in your details (name, DOB, PAN card number, etc.).
- Verify: Follow the app’s instructions to finish the identity verification process.
- Acknowledgment and permission to view credit history: Authorise the app to retrieve your credit report from CIBIL. This information lets the app calculate your CIBIL score and advise you to improve your score further.
- Check out your CIBIL score: When you verify your identity, the app will provide your credit score. You can check your CIBIL score and gauge your financial health.
Conclusion
A major part of your financial profile relies on your CIBIL score. You can take charge of your creditworthiness by learning what elements go into determining your score and then using the advice in this guide to make positive changes.
Try the OneScore app that can help you know your CIBIL score in minutes.