What are the factors that affect your Credit score?
Credit score is a numerical value between 300 and 900 that represents your credit history. It is calculated by considering certain factors related to an individual’s credit behaviour. In general, credit score is affected by four factors:
- 1. Repayment History – Repayment history will have all the information related to your repayment of loan and credit card from day one. You will have a good repayment history, if you have paid the loan on time without any default. If you make any delays or defaults in loan repayment, it will be recorded in the repayment history. A good repayment history generally will have a good credit score.
- 2. Length of credit exposure – It is the duration for which you have maintained a credit history. Longer the better. If you are someone who haven’t taken any loan, then you will not have any credit history. Length of credit exposure is important as it gives the lender a vote of confidence in the borrower.
- 3. Credit mix – A good mix of secured vs unsecured debt, long-term vs short-term loans and loans vs credit card dues helps to improve the credit score.
- 4. Errors in credit report – It is advised to check your credit report twice a year. Regularly checking of credit report will help you identifying the errors.