Factors Affecting Credit Score


A credit score is a number, which represents the creditworthiness of an individual. It gives a picture of a person’s financial health and how responsibly he uses his money. Lenders such as Banks, Credit card companies used Credit score to evaluate the probability of repayment of loans on time.

In India, there are four credit information companies licensed by The Reserve Bank of India.

  1. The Credit Information Bureau India Limited (CIBIL)
  2. Experian
  3. Equifax
  4. CRIF High Mark
CIBIL Score 300-900
Experian Score 300-900
Equifax 300-850
CRIF High Mark 300-900

Among the above companies, the CIBIL credit score is the most popular and oldest credit bureau in the country.


  • First, credit score influences the ability to avail a loan. A good credit score makes you eligible for getting loans and credit cards.
  • It affects the rate of interest on loans. A person having a high credit score will end up paying a lower rate of interest on loans as compared to a person having a low credit score.
  • A healthy credit score creates a positive impact on your visa application.


Mainly the following factors to consider when calculating a credit score:-

  1. History of Payment– It is the most essential element of credit score. A major part of the credit score depends on your past payment history. Timely payment affects your credit history. If one wants to maintain a good credit score, their repayment record should be positive. The timelier you are in your payments, the more your credit score will improve. Delayed payment leads to a lower score.
  2. Types of Credit- Having experience with different types of credit such as credit cards, store account, installment loans, and mortgages improves your credit score. Having a mixture of all forms of credit is a good factor to maintain a good credit score.
  3. Amount Owed- This includes the amount owed on different installment loans. The credit utilization rate is even more important. It means the percentage of a borrower’s total available credit that is currently being utilized. It is best to have a credit utilization of 30-40% which means if you have a credit limit of 1, 00,000 then you can use around 30,000 to 40,000. The four credit bureaus take into consideration the credit utilization ratio while calculating the credit score.
  4. Credit History Age- The following points are considered while seeing the age of credit:-
    • Age of oldest account
    • The average age of all your accounts
    • Age of recent account

Long credit history is helpful as it gives the lender a clear picture of your finances. Opening new accounts could lower the average age of accounts, which will adversely affect your credit score. Therefore, keeping your old credit accounts always active helps to maintain a good credit score.

  1. Recent Credit- Lenders usually do two types of inquiries- hard inquiries and soft inquiries.
    • Hard inquiry is also known as hard pulls and happens when a creditor checks your credit for giving you a loan or credit card.
    • Soft inquiry– or soft pull is where you or a company is simply looking for information without your seeking credit.
    • Creditors go for hard pulls when you apply to open a new line of credit. Hard pulls can temporarily cause a decline in your credit score.


  • Paying the bills on time. Making repayment on time is the only assurance that you give the lender about your loyalty towards the credit.
  • Avoid making multiple credit card inquiries or loan applications at the same time. Space out your application of loans so that the lender is not scared off.
  • Ensure you pay your loans and installments on time.
  • Maintain a low credit utilization ratio
  • Keep a healthy relationship with the banks and other financial institutions.
  • Keep a regular check on your credit score.

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