Know Factors that govern your Credit Score at Letzbank

Normally no one is so much bothered about their credit score until your loan or credit card approval gets rejected. The moment your loan or credit card application gets rejected you get find out that your credit score was the culprit. Sometimes inspite of having a good track record and customer history your loan get rejected because your score is low due to other loans that are already prevailing. That is the reason why one should be fully acquainted with what is a credit score and what are the various factors that govern your credit score
What is a credit Score?

Credit score is a numeric value which is decided based on your credit history, repayment records, loans pending and loans applied for etc.  So anytime you apply for a loan or a credit card your credit score is seen based on which your loan is approved or rejected.


What factors govern your Credit Score?


35% of the total credit score is based on your Payment History

Payment history refers to as your financial transactions such as your loans borrowed, details of your credit card. So if you have missed an EMI or two it will reflect in your payment history. Even if you have a smaller revolving loan it may not lay an as positive impact while calculating your payment history can therefore lay a bad impact on your credit score. Having a longer payment history will be considered to analyze how your payment behavior would be in future. The only way to improve your credit score is to borrow as per your needs and not as per your greed and ensure that you are able to pay back in time to have a good credit score.


30 % of the total credit score is based on credit utilization of borrower

Say if you have a credit account and you have used a credit, and not able to pay back, it will lay a negative impact on your credit score. The financers are looking at the fact that you are financially responsible individual before they lend you the loan. So whether it is a loan account, credit account, mortgage loans, auto loans, or whatever debt you know you should be able to make payments in a responsible manner.


15% of your credit score is based on the entire length of your credit history

Wondering how the length will lay a negative or positive impact? It is important that you have a good borrowing and repayment history. Having a longer history will help your financer decide if you are good or bad customers based on the fact that you have made the payments in time. Having no history is bad as there will no basis to assess your reliability.


10% of your Credit Score is based on your Credit in use (10%)

10% of your credit score is based on the credit in use which means you’re the credit card utilization, the monthly EMI you bear for any loan, how much you are earning and how much you have saved in past in your retail accounts, the mortgage loans, etc.


10% of your credit score is based on new credit you want to borrow

This means that if you wish to open several credit accounts in a short span of time then the risk associated to give you a loan will be much higher, as your financer can suspect you to not make payments in time due to debt. The risk associated in lending you the loan can be higher if you are a customer who just opened a couple of credit accounts this would be mainly due to lack of long credit history, and your credit score can go low.


Now that you know what forms the basis of your credit score here are certain things to keep in mind:

  1. Do not open credit accounts all at once
  2. Ensure you make payments – EMIs, Credit Card bills, etc. in time
  3. Do not have a revolving credit
  4. Try and have good re-payment history since having no credit history is even worse.
  5. If you have a low credit score improve your score by visiting Experian at Letzbank.

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