Tell me how is credit score calculated
The main factor behind your credit score calculation is your payment history.
In fact, it is not as complicated as it sounds. It mostly comes down to how you have handled money you have borrowed in the past, and a few other simple factors.
If you have paid your credit card bills, loans, or EMIs on time, your score goes up. If you have missed payments or defaulted, it shows right away.
Apart from that, here are the other things that matter:
- Credit Utilisation Ratio: This is how much of your credit limit you are using. Cross 30–40% and your score may take a hit.
- Age of Credit: The longer you have held a loan or credit card, the better it looks. Do not close old accounts if you can avoid it.
- Total Number of Accounts: Having a mix of loans and credit cards shows you can manage different types of credit.
- Hard Inquiries: Each time you apply for new credit, lenders check your report. Too many checks in a short span can pull your score down.
All these factors together decide whether you fall on the lower or higher side of the credit score range, which in turn shapes your chances of getting loans and credit on good terms.