How Is My Credit Score Computed ?
Your credit utilisation ratio plays a major role in deciding your credit score. For the uninitiated, this credit utilisation ratio is computed by comparing one’s overall outstanding amount to the total credit limit available to them. Ideally, using around 30%-40% of your overall credit limit will help you maintain a high score.
Length Of Credit History
A credit score is computed by taking into account one’s credit history. So, it only makes sense that people with a longer credit history will have more information to provide regarding their credit transactions. Handing your credit responsibly for extended periods of time will go a long way in ensuring that your credit score comes out accurately as well.
Since we’re already on the topic of credit history, it’s time we talk about another aspect pertaining to this element that we’ve touched upon briefly – consistency in credit payments. It doesn’t take an expert to understand that paying your dues (such as bills, EMIs, loan amounts) on time will go a long way in positively impacting your credit score.
A factor that most people aren’t aware of when it comes to their credit score is the fact that inquiring about this score can also impact your credit rating. Don’t worry – we’re not talking about an individual checking their credit score. Rather, it’s when multiple banks and NBFCs frequently check your score that there’s an impact – albeit, a minor one.
While it may not have a major impact, having a good mix of both secured and unsecured credit can certainly play in your favour while computing your credit score. Avoid taking too much of one, since it might upset this balance – and, consequently, your credit score.