Did you just learn the crif score meaning and are wondering about how it is calculated? Well, there are so many factors that play a significant role in the CRIF scores. You might also be aware of some of them without knowing their significance. Some of them are obvious whereas others may not be. Let us have a look at the most important factors which will help you score high on CRIF exams.
1. Current outstanding credit
This is an important factor that affects your CRIF score when you apply for a loan. If you have a lot of debt and don’t make payments on time, this can cause your score to drop. This also happens when you take out a loan and don’t pay it on time. If you want to improve your credit score, make sure that all of your accounts are paid in full every month.
2. Payment history
Your payment history is another factor that impacts your credit score and it can cause it to drop if it is not maintained consistently over time. Keeping track of all payments made on time will help keep this record clean and clear. You should also pay down any balances or loans as soon as possible so they won’t affect your overall score negatively when applying for new loans or other credit cards in the future.
3. Debt to income ratio
The higher the debt to income ratio, the more likely you are to default on your loan. A good way to gauge how much debt you have is by looking at your total credit card balance and comparing it with your monthly salary. If this number exceeds 30% of your salary, then you need to do something about it. One small difference between credit score and cibil score is that this factor may not necessarily affect credit score in every case.
4. Credit utilisation ratio
This ratio measures the amount of available credit that you’re using. The higher the number here, the more likely you are going to get into trouble with lenders because they will expect you to pay back this amount before they grant any further loans or lines of credit for other purposes. You can consider reducing your credit card usage as well as increasing savings so that this ratio doesn’t get out of control.
5. Credit mix
In the credit mix metric, a credit score is based on the number of different types of accounts that you have. This includes credit cards, bank accounts, and auto loans. The greater number of different types of accounts you have, the higher your score will be. However, having only one type of account can lead to a low score because it makes it easier for lenders to access your information.
6. Period of credit history
The period of credit history metric looks at how long it has been since an account was opened in your name and what type of accounts were opened during that period. The longer it has been since an account was opened in your name, the more valuable the account is to lenders and therefore the higher your score will be.
7. New credit applications
If you apply for a new credit card or loan, your score will drop for about two years because you are adding more debt to your credit report. You do not want this to happen as it would be bad news for your financial health, especially if you’re just starting out with building up your credit history.