Factors influencing civil score calculation

For credit holders, there is nothing more fearful than the monthly trial of cibil score calculation. We all dread it for it assesses our creditworthiness every month and accordingly, the bureaus award us credit scores that range from 300-900. A slight shift in our payment method or a lapse while dealing with finances could be painful for most of us as it could last for years. Our creditworthiness is an important factor that allows investors to judge and decide whether they could lend us their money.

In simplified terms, credit scores not only determine whether or not a borrower qualifies for a loan, but it also has an impact on the terms and conditions on which a loan can be availed. It is important to remember here that each credit information bureau has its proprietary algorithm that calculates and awards individuals with a credit score. The three-digit number reflects a borrower’s creditworthiness, which is based on several factors like timely repayment history, credit utilisation ratio, credit mix, hard inquiries and more. So, better your chances of availing the loan faster and on favourable terms. 

Below given are the factors that help in cibil score calculation to evaluate your scores.

1. Repayment history: Make it a practice to pay bills on time else it could lead to serious payment issues. Even a single miss could hurt you and if you have been a consistent defaulter with it, you could be weighed down with charge-offs, collections, bankruptcy, foreclosure, etc., that could ruin your credit scores. The impact of a late payment on scores depends on how much you owe.
2. Delinquencies: Your credit score could drop as miserable if the credit report is delinquent. Multiple or longer period of delinquencies affect credit scores negatively dropping them by 125 points. These could stay on your credit reports up to seven years signalling potential irresponsibility to future creditors.
3. Credit mix: A balanced mix between secured loans and unsecured loans is likely to have a positive impact. Secured loans include auto and home loans that have collateral while personal loans and credit card loans are unsecured loans as they don’t back any security. Secured loans have a positive impact on credit scores if the instalments are repaid on time.  
4. Get a co-signer: This is one of the best ways to get a loan on depleting scores and while you continue to work on them. This is because not all are fortunate to convince someone with high scores to be a guarantor for you. A very ideal option could be to get a partner to become a co-signer as it would save you from a lot of social embarrassment.

Remember that while these are some of the prime factors that contribute largely to cibil score calculation; several other aspects affect it.