Your CIBIL credit score is an indication of your financial stability and helps lenders decide whether or not you are an individual worth taking credit risk. Basically, a credit score tells the lender what the probability is that he will repay the loan he is looking for.

Your CIBIL credit score is calculated based on your credit usage history and how you handled past payments. If you have been regularly paying your monthly equalized payments (EMI) and have not defaulted, you have a higher score. If you use credit sparingly and don't borrow beyond your means, you will have a higher score, which in turn improves your credit rating.

Scores between 700 and 800 are considered good, but lenders are now applying stricter rules. If you score below 650, it is very likely that your loan application will be rejected or that you will have to pay very high interest rates. If you score below 600, you won't get a loan.

The lower your CIBIL credit score, the greater the probability of default. You must access your score at least once a year to get an indication of your credit rating. If you plan to take out a large loan (for example, a mortgage loan) in the next 24 months, it is recommended that you check your score every six months so that you can improve it and increase your chances of getting a loan.

What will affect your credit score?

If you don't have a credit history, creditors can treat you the same way as if you had bad credit. This may seem unfair, but the reason is that you have not established a history showing that payments are made over an extended period of time.

Scoring Parameters: Each person's credit score is different and is evidence of varied credit behavior. The credit score is not permanent. It is extremely dynamic and continues to change as a person changes their financial behavior.

The score is calculated based on the parameters of the person's credit profile at that time. It is important to know that the following parameters are taken into account when calculating the consumer's credit score:

Use of credit: How much credit is being used? The constant high use of the credit limit is unfavorable, and vice versa, the lower your credit use, the better. As suggested, one is using a small amount of the credit provided to them.

Defaults / Payment History - How many accounts are past due, for how many days, and for how much value? If you have already taken a loan, your payment history is the most important factor that determines your credit score. Regular repayment of loans means you are given a higher score. If you have missed payments, delayed or missed payments, your score will be much lower.

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You enter information about your credit history and are given a score or range of scores that match your profile.