As more individuals rely on loans and EMIs, a borrower’s credit score becomes increasingly important. It gives a glimpse of one’s financial health and allows the borrower to obtain the best interest rates on the market.
A credit score is a three-digit number that is awarded to a person on a scale of 300 to 900 points. A score of 750 or more is considered good. It is important to understand that the credit score is also strongly related to the interest rate.
HISTORY OF PAYMENTS
Payment history is the most essential component in determining a credit score. You must guarantee that no payment is delayed or missing. A missing or delayed payment might have a negative impact on your credit score.
UTILISATION OF CREDIT
Credit utilisation refers to an individual’s use of his or her credit limit. It is best to avoid utilising more than 30% of the available credit limit.
A mix of credit is required since it demonstrates the capacity to manage various sorts of credit products.
HISTORY OF CREDIT
A credit history shows how long you’ve been using a credit product. A long credit history demonstrates one’s capacity to handle credit over a prolonged period of time.
BRAND NEW CREDIT
Too many new applications may give lenders the impression that the borrower is having difficulty managing cash flows.
Other characteristics unique to one’s profile may also have an influence on one’s credit score. One of these criteria is the overall amount owed for various credit products used.