Clix > Credit Score > Factors that influence one’s credit score

Factors that influence one’s credit score

Clix December 27, 2019

When it comes to planning out your finances, it goes without saying that your credit score plays a crucial role in deciding how things play out. While a good credit score will inevitably lead to easier loan approvals and better credit offers, the inverse is true if your credit score is less than ideal.

Consumers are very much aware of their credit score’s importance, with a 2017 CIBIL Survey Report highlighting that 74% of respondents checked their credit score at least twice a year. More than half of said respondents carry out this action to either figure out ways to improve the score or gauge their eligibility to avail a line of credit.

Every individual would find it in their best interest to optimise their credit report. Doing so will ensure that little to no problems come in the way of their long-term financial plans. However, most of these people find themselves looking for answers when it comes to figuring out the factors that affect this credit score, to begin with.

If you’re looking for ways to improve your credit score but aren’t sure on what affects this number, then you’re at the right place! We’ve listed out some of the most significant elements that have a considerable impact on your credit score.

Repayment history

Showing diligence in paying off your dues plays a significant role in deciding your credit score. It’s easy to see why this is the case –people who pay their dues on time and acknowledge their financial limits show that they can handle their credit seriously.

Meanwhile, people who delay paying their dues and – in general – aren’t responsible when it comes to handling their credit will find themselves stuck with a bad credit score, leading to unnecessary difficulties and challenges in availing certain lines of credit.

Credit utilisation rate

Another aspect that reflects on one’s credit score is the manner in which they utilise their lines of credit. There are two sides to this. The first is the total amount of credit availed, and whether it’s manageable from the borrower’s point of view – a simple concept to understand. 

The second is the ratio of credit utilised from various channels. Basically, it’s the total amount of debt you’ve accrued, compared with the total credit limit you are privy to. Take the example of a credit card – experts recommend using 50% (maybe 65%-70% if they’re being generous) of your credit card. Exceeding this limit is a red flag that will harm your credit score.

Length of credit history

Longer credit history is definitely preferable for lenders as it provides a more transparent view of a person’s financial history and eligibility. This factor isn’t a deal-breaker – people who don’t have an extensive credit history won’t automatically have a bad credit score. However, a detailed credit history will work in favor of anyone who wishes to attain a high credit score.

Diversity of credit portfolio

Most financial advisors tell people to invest in different lines of credit, as opposed to relying on a single line. Do keep in mind that this is a minor factor, so only opt for specific lines of credit if you genuinely require it and not because you solely wish to improve your credit score.

Credit inquiries

A credit inquiry can also affect your score. There are two kinds of inquiries – the first kind is a soft inquiry, such as when you check the credit score of your own accord. These actions generally don’t affect your score… that is, unless you repeat it over and over again.

However, a hard inquiry has relatively more of an impact. Incidences like when a creditor checks your score to gauge your eligibility can have a negative effect on your credit score, regardless of whether the loan is approved or not. However, this effect is somewhat temporary and responsibly maintaining your credit will bring your credit score back to normal in no time!

With Clix Credit View, you’ll be able to inquire about your credit score with little to no issues! Rest assured that checking your score with us will not affect your score in the slightest.

Your credit score plays a vital role in deciding your financial situation – both in the short and long-term. By keeping the factors mentioned above in mind, you’ll be able to maintain a healthy credit report that will allow you to avail for lucrative lines of credit with the greatest of ease.

For additional guidance, Clix Capital is here for you. Just contact us on hello@clix.capital or call us at 1800-200-9898 for additional guidance!

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