Your CIBIL score is one of the most important financial numbers that one needs to take care of but is often ignored due to a lack of awareness. Not only does a CIBIL score affect the rate or the ease with which you can get a loan, but it also determines the interest rate you’d have to pay for your credit cards. So, what is a good CIBIL score, and what are the factors that affect your CIBIL score? Here’s everything you need to know!  
 
CIBIL score, in the present financial market, is analyzed by each and every lender, from the smallest app-based short-term lenders to fully established banks. You even need to have a good CIBIL score to be able to make an account on app called CRED, a reward-based credit card payment app. Furthermore, even some employers tend to check an employee’s credit history in order to make hiring/promotion and raise-associated decisions.  
 
And on those lines, it must only be obvious that maintaining and keeping a check on your CIBIL score is as important as having money in the first place in today’s world. But before we get to the factors affecting the CIBIL score, let’s go over some basics first.

What Is CIBIL Score?

CIBIL is a credit bureau that manages the credit-related records and activities of individuals as well as of companies. CIBIL keeps a track of credit-related activities of all accounts and then generates a three digital score based on the summary of one’s credit history, called the CIBIL score. The higher the CIBIL score, the higher the chances of an individual to get a loan or any credit of sorts.  

A decent or average CIBIL score is considered to be a score between 650-720, whereas, a bad score would be a core of 600 or below and an excellent score would be 800+. 

Want to learn more about CIBIL Score? Here’s a mini-guide that can help!  

Factors Affecting Your CIBIL Score & How To Improve It

Let’s take a look at 5 major factors (percentage-wise) that are affecting your CIBIL score and how you can improve it.  

1. Payment History: 35%

The most important factor that affects a CIBIL score is one’s payment history; 35% of the total credit score depends solely on your credit payment history. Payment history, it must be noted here, refers to how much of a timely or untimely manner you pay your bills. If you are found to have had a bad repayment history or other associated issues like bankruptcy, repossession, tax liens, or foreclosure, it would wreak havoc on your CIBIL score. The best way to maintain a good payment history and credit score is by ensuring you pay all your bills and payments on time, every time. 

2. The Amount of Debt on You: 30%

How deep you are in debt also matters when it comes to the factors that affect the CIBIL score. Three aspects looked at when analyzing the cumulative amount of debt on you include:  

• The total amount of outstanding debts  
• The ratio of the credit card balance to credit card upper limit  
• The relationship between your loan balances to the original loan capital amount  

Needless to say, if you have a high debt amount, your CIBIL score would go down. But again, it can also be easily increased by simply clearing off the debts.  

3. Credit History Age: 15%  

Credit history refers to the total number of years you have been using a credit account of any type, whether it is in the form of a credit card, student loan, or even a personal loan. Of all the factors affecting CIBIL score, credit history takes up a good 15%. Unlike what you would have most likely assumed, having a longer credit history actually increases your CIBIL score (gives you a better score) because it goes to say that you have experience handling and managing debt. For example, if Sim and San are applying for a credit score with a credit history age of 10 years and 15 years respectively, San will ideally have a higher CIBIL score than Sim.  

That being said, other aspects like your payment history and opening new accounts/ closing old accounts can lower the average credit score.  

4. Types Of Historical Credit Accounts: 10%

There are two types of credit accounts, namely:  

• Revolving credit accounts (typically credit cards and some home equity loans)   
• Installment credit accounts (loans where you borrow a fixed amount and agree to make a monthly repayment).   

Both of these accounts act as one of the factors affecting the CIBIL score. If you have only one of these two types of credit accounts in your credit report, your CIBIL score will go down. In other words, it is recommended to have revolving credit as well as installment credit accounts on your sheets to increase your CIBIL score. The logic, again, is that both types of accounts will indicate that you have experience of managing various types of credit.  

5. Number of Credit Inquiries: 10%

Does checking the CIBIL score multiple times affect it? Well, the last of the factors affecting your CIBIL score is the number of hard credit inquiries. A hard credit inquiry here refers to the total number of times a potential creditor or a third party tries to access your credit report to determine your eligibility for lending. While one or two inquiries will not make much of an impact, multiple inquiries, especially without a corresponding sanctioned loan, can considerably lower your CIBIL scores. It is hence recommended to keep your loan applications to a minimum in order to maintain a decent credit score.  

It must be noted, however, that only the inquiries made on your credit report in the recent 12 months are considered while determining your score.  

Final Thoughts: Can Service Accounts Impact Your Credit Score?

No, service accounts like electricity bills, phone bills, and other utility bills are not considered in a credit file or when determining a credit score. The only one-off chance where your service account may, however, be considered is if you default on a payment and a collection agency needs to be sent to recover the payment from you.  
 
Looking for more help around CIBIL score and understanding factors affecting CIBIL score? Write your queries to Protium here and we will do our best to help you!  

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