Factors That Determine Your Credit Score

Are you wondering, what affects your credit score or how is your credit score calculated? If so, you’re not alone. Understanding the factors that determine your credit score can often feel like deciphering a complex puzzle. However, with a little knowledge, it becomes easier to navigate the world of credit scores and improve your financial health. Let’s delve into the significant credit score factors and how you can check your credit score on the Airtel Thanks app.

What is a Credit Score?

A credit score is a numerical expression that lenders use to evaluate the creditworthiness of potential borrowers. It is a three-digit number, ranging from 300 to 900, with a higher score indicating a lower risk for the lender. Understanding the factors that affect your credit score is vital as it impacts your ability to secure loans, credit cards, and even employment.

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Factors That Determine Your Credit Score

Several factors can affect your credit score, depending on your credit usage. Here are the top 5 factors determining credit score:

1.   Payment History

The most influential factor in credit score calculation is your payment history. Late payments, defaults, bankruptcies, and other negative information can significantly lower your credit score. On the other hand, a history of on-time payments can positively impact your score.

2.   Credit Utilisation Ratio

Another critical factor determining your credit score is your credit utilisation ratio – the percentage of your total available credit that you’re using. A lower ratio is better for your score. Experts suggest keeping your credit utilisation under 30% to maintain a healthy credit score.

3.   Length of Credit History

The length of your credit history also affects your credit score. This includes the age of your oldest account, the average age of all your accounts, and the age of specific types of accounts. Longer credit histories generally lead to higher scores as they provide more information about your long-term financial behaviour.

4.   New Credit

Opening several new credit accounts in a short time can negatively affect your credit score. Numerous credit inquiries can indicate higher risk to lenders and could lower your credit score.

5.   Type of Credit Used

The mix of credit types you have also plays a role. A combination of revolving credit (like credit cards) and instalment loans such as mortgages, auto loans, and student loans can be beneficial for your score.

How to Calculate My Credit Score?

Now that we understand what impacts a credit score, let’s move on to another common query – ‘How is credit score calculated?’ Thanks to Airtel Finance, you can quickly check your credit score via the Airtel Thanks app by following these steps:

1. Download the Airtel Thanks app.
2. Register/log in using your registered mobile number.
3. Go to the ‘Manage Page’ under the Airtel Finance section.
4. Click on the tab labelled ‘Credit Score’.
5. Enter your Personal Details such as full name, contact details, gender, DOB, PAN, email, and current pincode.
6. Once all the details are in click on ‘Check Now’.
7. Now, if you have a good credit score you’ll ideally be eligible for a personal loan.

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In conclusion, understanding the factors that affect your credit score, and how it is calculated, is crucial to maintaining financial health. With the Airtel Thanks app, you can easily monitor your credit score and take steps towards financial stability.

FAQs

1.   What are the main factors determining credit score?

The main factors determining your credit score include your payment history, which gauges your consistency in paying off debts, your credit utilisation ratio, which measures how responsibly you use your available credit, the length of your credit history, the amount of new credit you’ve applied for, and the type of credit you’re currently using.

2.   How is credit score calculated?

Your credit score is calculated using a complex algorithm that analyzes the information in your credit report, including your payment history, the total amount of debt you have, the length of your credit history, and more. Each of these factors is given a certain weightage, and the final score is computed based on these weights.

3.   What is a good credit score?

A score of 700 or above is generally considered good. This means you’ve been responsible with your credit usage, which makes you an attractive candidate to lenders. A higher score can lead to more favourable loan terms and interest rates.

4.   How can I improve my credit score?

Improving your credit score involves responsible financial habits. This includes paying all bills on time, keeping your credit utilisation ratio low, not applying for new credit too often, and maintaining a healthy mix of credit types. Regularly checking your credit report for errors and disputing any inaccuracies can also help improve your score.

5.   How can I check my credit score?

With Airtel Finance, you can easily check your credit score by downloading the Airtel Thanks app and signing in with your registered mobile number. On the ‘Manage’ page, look for the ‘Credit Score’ tab under the ‘Airtel Finance’ section. Enter your personal details such as name, contact number, gender, date of birth, PAN, email, and current pincode. After entering these details, click on ‘Check Now’, and your credit score will be displayed.