Credit Score & Factors Affecting Its Negative Level

The financing options are increasing day by day with easy and convenient terms. Nowadays, there is no need to influence the money lender with unique tricks for availing the loan. There is a credit score of every person who has a bank account. The finance institutions get data from there for identifying your eligibility to get a specific amount. The creditworthiness of a person is identified by numeric figures that are called a credit score. The higher value in scoring numbers means higher chances to get the expected amount of loan. This is not all, the good or bad credit score of a person is also responsible for specifying the percentage of interest rate. You must be wondering that what is a bad credit score & how it is calculated. Scroll down to get your answer.

The process of calculating the credit score of a person

Before going in-depth details, clear one thing in mind that the credit scores vary on the basis of tools that different financers use. Currently, three major credit bureaus are providing data for calculating score i.e.
1) Equifax
2) Experian
3) TransUnion

Also, the credit score might differ on the basis of different industries. For instance, your auto loan provider will consider credit score in a different way as compared to the property loan. The calculation methods may vary, but there are some primary factors that every agency consider. Here is a list: –

1) Number of bank accounts
2) Types of accounts such as current account, saving account or salary account.
3) A proportionate ratio between credit and debit preference
4) Previous credit history
5) Length of credits history

Factors responsible for a bad credit score

1) Late payments or not paying at all

It is obvious that if your payment history regarding previous credit is not good, the lender will surely hesitate to give a new loan. If paying later than due date is your habit, or if the previous installments are still unpaid after crossing all deadlines, CIBIL score level will go downward. Hiring the best credit repair agency can help you by negotiating with the lenders.

2) Charged off account

The charged off account of a person means previous lender has given up after allowing all possible deadlines of payment. They consider you as a bad debtor in their account books and mark the account as charged off. This account status will appear everywhere when you submit a file for a new loan request. The lenders consider such accounts in the most untrustful category.

3) Exceeded credit card limit

If you highly rely upon a credit card for shopping rather than debit card, the credit score level will definitely go downward. Now the question is, how to rebuild credit? Never exhaust the credit card limit and keep it under 70% of the total limit so that remaining balance will not become the hurdle in getting a loan as per the expected rate of interest and term.

4) Guarantor of a bank defaulter

Even if the loan is taken by a friend or family member on your behalf, it will also affect your credit score. The financial institutions check your profile regarding such kind of matters thoroughly too.

In general terms, the CIBIL score more than 700 is a good numeric figure to avail the loan. However, read the terms of agreement carefully before signing on it. Any hidden information may cause difficulty while paying back the installments.

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