We have actually discussed how CIBIL’s TransUnion score can make or break your monetary practicality while obtaining a loan. But ever wondered exactly how your CIBIL score is calculated?
According to Harshala Chandorkar, senior vice president – customer services and interaction, CIBIL, while preparing the credit score, emphasis is laid on three major guidelines– previous financials, credit exposure, as well as credit type and duration.
“While determining an individual’s CIBIL TransUnion Score, 30 % emphasis is given on the past performance while 25 % each is laid on credit exposure and credit type and duration. 20 % consists of other factors,” said Chandorkar. Other elements include the credit utilization, current credit behavior which consists of the remaining 20 % of the score.
How Your CIBIL Score is Calculated Is Key To Improving Your Score
So, how is your CIBIL Score is calculated? One need to keep in mind that an individual with a credit score of 750 and above are typically considered financially healthy by credit institutions.
“Your CIBIL TransUnion Score is determined based on the details in the “Accounts” and “Query” section of your CIBIL Report. The score is calculated based on how much credit is the customer making use of or the number of accounts are unpaid and by how many days?” she explained.
In terms of the ‘trade characteristics’, CIBIL considers whether the individual has the best mix of credit. For instance, if a customer relies greatly on charge card, his rating will be comparatively lower than someone who uses charge card as much as a particular limit.
Chandorkar kept in mind that these elements are taken into consideration while preparing an individual’s credit report as these aspects determine the person’s opportunities of defaulting on a loan if he gets one.
A strong past credit efficiency enhances a person’s financial integrity while the kind of loan taken by an individual– secured or unsecured loan assists a bank identify the threats involved in extending a loan to the person.
It ought to be noted that CIBIL Report and CIBIL TransUnion Score are not tips to whether your loan application gets approved however also plays a pivotal role in putting down the terms on which you can obtain the loan.
“The greater the credit score, the much better your possibilities of getting the loan faster and on beneficial terms. It is advisable to check your CIBIL Report and CIBIL TransUnion Rating prior to making an application for a loan. Prompt payment of EMIs is essential for preserving an excellent credit history and a healthy credit score,” restated Chandorkar.
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