Top 7 Factors Affecting Your CIBIL score in 2022


14 Apr 2021 | 5 min read

Are you the one who’s been applying for loans and getting rejection every time? This is a matter to worry about but yet we would say don’t worry, stop applying for more, instead, perform on the factors that are leading them every time to fall into the rejection bucket. Most of the time, it takes place due to your poor CIBIL score. Your CIBIL score reflects your credit nature and repayment willingness and capability. 

CIBIL is one of the leading credit information agencies in India, that evaluates your credit nature and creditworthiness to assign a CIBIL score figured out on a scale of 300 to 900. This often takes place as per the repayment data shared by moneylenders to the credit bureaus. 

Financial institutions such as banks and NBFCs use CIBIL scores to determine the insights of their customers, assess the risks, and make efficient credit decisions.

Generally, a CIBIL score of 750 and above is desirable. The higher the score, the higher it reflects on your creditworthiness, as a borrower or loan applicant. Below, we have stated the top 7 factors that if you consider working on will help you to attain approval on any kind of credit facility. Let’s plunge into the post ahead! 

1. Timely repayments 

Missing on payments or not paying dues on time reflect notably on your repayment capability and if this takes place often, it can surely beset your CIBIL score. 

CIBIL assigns a particular weightage to this criterion and paying off dues shouldn't be taken lightly. Not just loans, but make sure you also pay the dues of credit cards, utility bills, and any outstanding dues timely. Clearing your debt obligations on time works in the interest of your long-term financial wellbeing. 

2. Multiple debt applications 

Once you apply for multiple credits from one or many lenders, it is recorded as a tough inquiry for new credit and it negatively affects your CIBIL score, depending on how much new credit you are planning to take out and thus the behavior of the loan. 

In the same way, if you apply for multiple credit cards and your repayment history for those you already use is patchy, the CIBIL score will mitigate considerably. Additionally, it demonstrates that you are pushing yourself into a debt trap. 

Remember that if you apply for multiple lines of credit, it demonstrates negatively to moneylenders that you are in dire need of funds and consequently, your entire credit profile will scale down along with your credit score. 

3. Spending high on credits 

Making pricey buying on credit cards and using the maximum credit limit does not affect you as long as you pay off them within time. But once you default on the repayment of your dues fully or partially, it connects you with the debt burden. 

Therefore, try to retain your credit utilization below 30%. Similarly, availing of personal loans constantly to get high-value items should be avoided as it may harm your CIBIL score

4. Foreclosure of loans 

While pre-payment of loan facilitates to shed the debt stress, its effect is often negative on your CIBIL score, certainly if it is a secured loan such as car loan, home loan, etc. 

This is often because it mitigates the credit history and in terms of interest, your charge account does not reap the benefit for the lender. For this cause, a lender may charge you a pre-payment fee based on the type of loan that you have got pre-paid and thus, the source of cash for repayment. Therefore, before pre-payment of the loan, assess the advantages and disadvantages. 

5. Credit report error 

Error at the end of credit information entities while assigning a CIBIL score can also have an undesirable impact on your CIBIL score. If ‘default’ is assigned against a particular loan, but in actual, if you diligently pay or have already paid off, bring it to the observation of the credit information bureau and/or the respective lender and resolve. 

If you have finalized a loan, do not forget to get a closure letter or No Due Certificate (NDC) from your moneylender, statement of account(s), original documents that you have attached with your application to the lender, and take away lien on assets. 

All this has been performed earlier and thus, foothold as evidence for you and facilitate you in lifting your CIBIL score potentially. If the moneylender has not intimated the agency about the closure of your loan account, roll in the hay by yourself by writing to them and submitting the necessary documents as proof. Therefore, search your credit report monthly to see if it is error-free and is not negatively affecting your CIBIL score. 

6. Credit Mix 

A perfect credit mix is a mixture of secured loans and unsecured loans. Loans that require the lending institution to pledge an asset to avail a loan is considered as a secured loan. These loans include home loans, car loans, etc. 

Unsecured loans are not supported by any kind of collateral and are hence signified as ‘unsecured’. Avail a replica of your yearly credit report and make sure that it is free from errors. Function towards setting up and sustaining a healthy credit score to make sure you can negotiate credit at better rates potentially. 

7. Length of Credit History 

Banks hold an in-depth report of your credit past. Potential moneylenders can avail of an in-depth report of your credit behavior right from the primary time you have availed of credit. 

An extended and positive credit history puts a significant positive impact on your credit score and helps in taking out credit history easily. 

Moneylenders lay weightage to a positive and constant repayment history over time and hence it would be a great notion to sustain your old credit cards even though you do not need to use them anymore. Closing old credit cards may lead to a fall in your credit score. 

The Final Stroke 

To sum up, the CIBIL score is a crucial element that plays a considerable in getting a loan, therefore, you must work on it stringently, consequently, you will be able to avail of instant access to funds when you face a financial crisis. 

Moreover, if you are seeking instant financial assistance, Afinoz caters to instant personal loans on low interest rates. To apply, simply visit the personal loan section on this website, compare multiple loan offers and apply for the one that suits your circumstances and your needs. 

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