InvestorQ : What is the credit score and How is the Credit score calculated?
Dia Deshpande made post

What is the credit score and How is the Credit score calculated?

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vani Patil answered.
8 months ago
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A credit score is the measurement of a person’s creditworthiness and payment capacity. It is measured between 300-850 and the higher the score, the better chances for a person to avail a loan. There are numerous credit agencies such as CIBIL that measure the credit scores of individuals. The calculation is based on the following factors:

Repayment History: The credit agency keeps a track of all of your financial transactions such as bills or your EMI payments towards a previous loan. If you make timely payments towards all the financial obligations, your credit score increases every month. However, even a single default can drag down your credit score by 100 points.

Credit Utilisation Ratio: CUR is the percentage utilization of the card credit limit available every month for a person. CUR becomes higher with every transaction using your credit card. However, if it is higher than 30%, this can negatively affect your credit score as it implies credit-hungry behavior.

Loan Portfolio: The credit score also depends on the number of secured and unsecured loans you have. The higher the number of these loans, the higher the credit score.

Time Period of Credit Lines: The score proportionate to the parameter's weightage rises with the age of your credit card or your loan. If you have made timely payments all over the tenure, your credit score will be the highest with every passing month. You can visit the websites of various credit agencies to find out your credit score online.


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