A credit score or a CIBIL score is a numerical representation calculated through a balanced evaluation of a person’s credit particulars. The credit score is useful for ascertaining the creditworthiness of an individual. It is primarily established based on a credit file containing relevant financial data obtained from various credit bureaus. In our country, the Credit Information Bureau (India) Limited (CIBIL) is one of the three sanctioning credit information bodies that collates and maintains the records of all the credit-related activities such as availing loans and credit cards of companies and individuals.

The important aspects of an individual’s loan repayment traits are evaluated using cutting-edge algorithms and data analytics that helps in calculating all potential risks that a company faces in extending credit to masses and countering bad debts. It is a 3-digit number that designates a person’s credit history determined by utilising data from the various accounts and enquiries part of their CIBIL report. The report conveys a person’s financial health and present standing. The crucial elements in a person’s CIBIL report are credit loan history and his or her payment status. The four essential markers that are assessed for gauging credit scores include:

• Payment records – It is not prudent to postpone payments or failing to pay them on the appropriate time as it is detrimental for the overall credit score.

• Credit blend – A well-balanced credit score that covers both secured and unsecured loans has more chances of reflecting an affirmative and desirable credit score as it shows that a person is scrupulous in managing finances.

• Multiple inquiries- Too many inquiries concerning past loans can also leave a negative impact on your CIBIL score as it means that there is a contingency for past loans to add up.

• Credit usage – An individual’s credit usage further reveals their spending traits. An increase in credit usage points to an upsurge in debt which can considerably impact the credit score.

It helps to make your payments on time, which is essential for maintaining an amicable credit score. This assists in depicting a good credit score that improves your credit access ability in the future.

The author is Co-founder & CEO, Smartcoin Financials