Do you know what is the average credit score in India?
If you belong to the 701 and 749 bracket, it is a pretty good credit score in the eyes of lenders. Even a score between 621 and 700 is also fair enough in India and unlocks your chance to avail a loan or credit card approval with decent terms and conditions.
Now, you might be wondering: what actually impacts your credit score? Well, it’s not just one or two things. Multiple factors are working behind the scenes. They are:
- Payment History
It contributes 35% to calculating your score. If you’ve ever missed a payment or paid late, your CIBIL score takes a hit.
- How Much You Borrow
Your due amount, how much you owe in relation to your credit limit, as well as the number of credit accounts with unpaid balances, all play a key role, contributing almost 30% to this evaluation.
- Length of Your Credit History
Lenders look at how long you’ve been managing credit, like your home loan or credit card. The longer the credit history, the more experienced you are: a sign of stability and reliability in the lender’s eye, contributing 15% to the calculation.
- Recent Credit Applications
Applying for new credit too often or within a short span indicates your financial instability or overdependence on credit. That’s why it accounts for about 10% of your score.
- Credit Mix
Lenders also check the variety of your credit accounts. A healthy mix, like a home loan, a car loan, and a credit card, shows you can handle different types of credit responsibly, leading to a boost in your score.
So, keep the factors in mind and with the right habits, you can start improving your score in just a few months.