As more and more people tend to rely on loans and EMIs, the credit score of a borrower becomes absolutely pivotal. It offers a glimpse of one’s financial health and enables the borrower the best interest rates on the market.
A credit score is basically a three-digit number which is assigned to an individual on a scale of 300 to 900 points. Any score above 750 is considered good. One must remember that the credit score is also directly linked to the interest rate.
So, if someone has a good credit score, then he or she can get a loan at the best rates on the market. However, if the credit score is not up to the mark, then the borrower won’t get a loan.
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PAYMENT HISTORY
The most important factor while calculating the credit score is payment history. You need to ensure that not a single payment is delayed or missed. A missed or delayed payment can dent your credit score.
CREDIT UTILISATION
Credit utilisation denotes the usage of the credit limit by an individual. One should ideally avoid using more than 30 per cent of the available credit limit.
CREDIT MIX
One must have a ‘mix’ of credit as it underlines the ability to manage different types of credit products.
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CREDIT HISTORY
A credit history indicates how long you are using a credit product. A long credit history points out one’s ability to manage credit for longer.
NEW CREDIT
Too many new applications may cause lenders to feel that the borrower is facing issues with managing cash flows.
LOCAL FACTORS
Other factors specific to one’s profile may also impact the credit score. One of these factors is the total amount one owes for different credit products that one uses.
