Here are 5 things that determine your CIBIL score

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Here are 5 things that determine your CIBIL scoreWe have always talked about importance of having a good CIBIL score and also how it can impact you. But how many of you know that a good CIBIL score means it should be 750 and above.

Your CIBIL score is a measure of your credit worthiness. In other words, banks look at your CIBIL score to find out how you have handled your finances and whether you have behaved responsibly with the credit you have already availed of in the past.

And if you are confused as to what makes your CIBIL score and impacts it, here are five things:

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Making timely payments
One hack that can pump your CIBIL score is, make all your payments on time. This is applicable to all the credit you already have. This includes credit card outstandings and EMIs on loans. Also make sure you make other payments like insurance premiums on time. Although it does not fall under the credit bracket but even a single late payment on a home loan or an unpaid outstanding on your credit card will bring your CIBIL score tumbling down and be a blemish on your CIBIL report.

Total credit availed
Credit is something that is easily available today. You may have two or three credit cards that you are using simultaneously, along with a home or a vehicle loan. While you are particular about repaying EMIs, you think its okay to pile on the debt on your credit card, because you are far from your credit limit. If you are under any such impression, stop right there! The amount you owe to your lenders makes a large impact on your credit score. The closer you are to your credit limit, the worse its gets! Ideally you should not be using more than 30% of your total credit limit at any given time.

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For how long you have had credit
‘Credit history’, as it is called in financial parlance, has a huge impact on your CIBIL score. If you have availed credit for a long time and have serviced it well, it certainly fetches you brownie points to increase your CIBIL score. A good credit history gives a prospective lender the confidence to lend to you.

Too much credit in a short period of time
If you apply for too many credit cards or loans in less time-frame, it sets the alarm bells ringing for any bank. As for your CIBIL score, it inches lower each time you apply for a new loan. Everytime you apply for a new credit card or loan, there is a ‘tough enquiry’ made on your CIBIL score and CIBIL report, bringing down the score a few notches lower each time.

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Good and bad debt
Believe it or not, the kind of debt you avail, impacts your CIBIL score. While home, vehicle and student loans fall under the category of good debt because they are ‘secured’ in nature, ‘unsecured’ loans such as too many credit cards or personal loans spell trouble and bring your CIBIL score down.

And you don’t have to worry about trivial issues that do not impact your CIBIL score. So, here are four things that really do not matter when it comes to CIBIL score.

Age
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Your CIBIL report does carry your date of birth, but it does not play any role in the computation of your score.

Address
Once again, your address is recorded, merely as a part of your personal information, but does not have any impact on your CIBIL score.

Your bank account and investments
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It is a good practice to keep your finances in order, but your savings and investments do not feature as a part of your CIBIL score. A credit score, as the name explains, merely has to do with credit.

The interest rate on loans
It’s great if you have managed to get a loan at a lower rate, but even if you have availed of a loan at a higher rate of interest, you have nothing to worry, as long as you are servicing it on time. The rate of interest does not have any impact on your CIBIL score.

( About the author: Rajiv Raj is the director and co-founder of www.creditvidya.com.)
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(Image: Thinkstock)