A CIBIL score is an important parameter that determines how a person works with credit, whether the individual is someone who can manage that fund, and how that individual is handling the loan amount.
A CIBIL is a credit body in India that determines a person’s creditworthiness and whether or not he is liable to get loans or credit cards in the future. One of the major problems for those who are using a credit card or taking a loan is that they need to make a timely interest payment, which will ensure that they can maintain a good credit score.
For example, a person who has contacted a loan agency for a loan and the responsibilities of that person is to gather the loan amount and check the due diligence process within which checking the CIBIL score is one such step.
In this blog, we will look into what are the important factors that can determine how a person can maintain their CIBIL score and what benefits they can get when they maintain a high credit score.
The Authority that Calculates the CIBIL Score
The authority that forms a person’s CIBIL score is TransUnion CIBIL Credit Bureau, which looks after different factors and determines how an individual can progress and make a positive living. The bureau checks aspects like the person’s age, income statement, and total expenditures using credit, which define the final score of the person.
Different Elements or Factors Which Determine the CIBIL Score
Now, we are considering the most important factors that are necessary for the benefit of the score, and an individual needs to check the 4 main factors that impact the score by many factors.
- The Repayment History
The first is the repayment history of the person, that will determine the total score of the person. It gets a quarter of the weightage, and through that, one can make progress in their score by making all the timely payments that are necessary to make.
A person who does irresponsible payment behavior feels the damage of the credit score, and the cost of credit gets higher as it downgrades the credit history of a person. Even a penalty or a late due payment results in a downgrade of the credit score.
- Total Borrowing to the Lenders
The next is how much a person owes to the lender, and the credit agency checks whether those amounts are near a close, and through that, a person becomes eligible for future loan options.
An individual who has a higher borrowing number has less chance to get further loans, and one needs to act to reduce that amount as it will then boost the credit score.
- Credit Type and Duration of the Debt
Next comes the type of loan which will also determine the credit score of a person. Here, the weightage is a little less than the repayment and total credit utilization, but the type of loan matters in a credit score.
Through a DSA app in India, one can find the right agent who can sell the customer the right loan. In a risky loan for example, where the repayment is quite tough in that case, the dent falls on the credit score as the loan becomes a risky prospect, which then reduces the CIBIL of a person.
- Credit Mix of a Person
The next part is the right credit mix of a person and that helps an individual to have a higher credit score. A right amount of usage of credit cards and loans defines whther the person has a good credit mix or not.
An individual with a typical particular form of borrowing tool often gets highly leveraged, and that can reduce the credit score by a bit.
Benefits of Having a High CIBIL Report
- Fast approval of future loans
- Lower interest rates for loans
- Getting better offers on credit cards
- Getting higher credit limits on credit cards
- Discount on the processing fee
These are some of the best ways through which one can maintain the credit score, and therefore, by maintaining this, one can take the benefits of a high CIBIL score.
