When you apply for a loan or a credit card, a lender will examine your credit score first. The secret to getting your loan request accepted swiftly is having a decent credit score. A variety of things are considered before determining your credit score. 

Your credit score and credit history will be checked by the bank as soon as you fill out a loan application and deliver it to them. Your bank will outright reject your loan application if you have a poor credit history and low credit score. However, if you have a high credit score, your bank will approve your loan application right away and go on to the next step. It is crucial to comprehend the variables that affect your credit score and take the necessary action to raise it if it is below expectations given that your CIBIL/credit score is the primary deciding factor in whether or not your loan application will be approved. 

1. Credit Repayment History 

A three-digit figure called a credit score is used to assess a person’s creditworthiness. A number of variables, including your credit repayment history, go into its calculation. 

A person with a good credit score will find it simpler and more affordable to obtain loans and other forms of credit than a person with a negative credit score. 

One of the most crucial components used to determine your Cibil score is your credit repayment history. Late payments, missing payments, defaults, and bankruptcies may have an impact on a person’s credit repayment history. 

2. Credit Utilization Ratio  

Your credit utilization ratio reveals how much credit you want. The amount of credit you can utilize in relation to your total credit limit is called the credit utilisation ratio. When you use your credit more frequently than you should, the credit bureaus form a negative opinion of your profile. 

In essence, it increases the possibility that you’ll forget to make a loan payment. Your credit profile, which is the culmination of many different elements, is represented by your score. The more positive aspects that are reflected in your score, the higher your score will be.  

A lower score can indicate that you are experiencing greater risk when it comes to borrowing money or applying for a loan, while a higher score indicates less risk and therefore increased borrowing opportunities. 

3. Increased credit limit

Requesting an increase in your credit limit could lower your credit score by showing that you are heavily reliant on credit cards. If possible, avoid choosing a credit card with a large limit unless it is absolutely necessary. So, monitor your credit usage and make an effort to keep your balances low. Only choose additional credit cautiously. 

4. Credit Mix

Your credit score is significantly impacted by the variety of credit accounts you have in comparison to your loan portfolio. Your portfolio is the entire quantity of secured and unsecured credit lines in your name. As the name implies, a secured loan is one that is backed by collateral in the form of an asset. A non-secured loan is secured by collateral.  

Your ability to pay a variety of loan EMIs and credit card dues demonstrates your ability to manage the several lending options that are offered. Your credit history is enhanced even further, and as a result, your profile appears creditworthy. 

5.Opening New Credit Accounts Frequently 

If you’re opening new credit accounts frequently, it shows that your existing accounts are not enough to fulfil your requirement which translates to a higher credit burden in future. This may bring your credit score down. 

Opening a new credit account can have an adverse impact on your credit score. A new account will generally lower your average age of accounts, which is one of the factors that is used to calculate your score. 

A low credit score will make it difficult for you to take out loans and may also increase the interest rates you pay on any loans you do take out.  

Guidelines for Keeping a Good Credit Score 

Here are some excellent suggestions that you can easily do to keep your credit score in good standing: 

• Pay your bills and EMIs on schedule. 
• Avoid missing bill payment deadlines 
• Keep your credit utilization ratio favorable. 
• Keep your old or unused credit cards active. 

• Do not hastily apply for numerous loans or credit cards. 
• The ratio of secured to unsecured loans should be maintained 
• Review your credit report frequently, pointing out any mistakes. 
• Keep your credit inquiries to a minimum. 
• Every month, review your joint, guaranteed, and co-signed accounts. 

A high CIBIL score demonstrates to lenders your strong financial capability incredibly well.