Credit Score

A credit score (ranges from 300 to 850) is a number that rates a consumers credit worthiness. This means credit score shows the probability that whether borrowers will able to pay debt in given time period or not based on their past history and help lenders to make decision about loan approval.

A credit score is based on credit history: how many number of accounts you have, how much loan you have already taken and your repayment history and other factors.

If you have high credit score then you will easily get loan at lower interest rate however if you have less credit score (can be due to late repayment of loan or high debt) then the chances of getting loan is low as compared to former one.

A credit bureau (such as Trans union CIBIL) will consolidate your past credit history and Repayment behaviour and will provide a comprehensive report to lenders.

5 factors that play an important role in calculation one’s credit score is given below.

1. Your repayment history

2. Your credit utilisation Ratio

3. The no. Of credit accounts

4. Age/duration of credit lines

5. No. Of credit inquaries made about you.

Written by - Aman Singh | LinkedIn