You know that a credit score is a 3 digit numerical expression, typically Between 300 to 900 based on a level analysis of a person’s credit files, to represent the creditworthiness of an individual. A credit score is primarily based on a credit report, information typically sourced from credit bureaus.
Credit scoring is not limited to banks. Other organizations, such as mobile phone companies, insurance companies, landlords, and government departments employ the same techniques. Digital finance companies such as online lenders also use alternative data sources to calculate the creditworthiness of borrowers.
What is credit scoring?
“Credit Scoring” is a system creditors use to determine whether to give you credit or not? If given, how much charge you for it.
Credit scoring method
There are many different scoring models and some use other data. Although the formula used for credit score calculation is a black box, the broad parameters used for scoring are:
Credit score formula
35% History of your payments – timely & late, impact your credit score most
30% How much you owe on your loans and credit cards indicates your loan servicing capacity
15% Longer credit history can work in your favor if you have been making timely repayments
10% High number of applications for new loan or credit card facilities indicates that you are credit hungry
10% Balance between secured and unsecured loans helps build a good score
If you still want to explore this, Apoorvaa is a one stop solution for all your questions related to credit report and credit score.
Menu
