What Are The Factors That Impact The Credit Score?


Your credit score is a crucial financial indicator that lenders, creditors, and even landlords use to assess your creditworthiness. It plays a pivotal role in determining whether you qualify for loans, credit cards, or favourable interest rates. Maintaining a healthy credit score is essential for your financial well-being, and understanding the factors that impact it is the first step in managing it effectively. With just a few clicks, you can initiate the personal loan apply online process and take the first step toward securing the funds you need.

What Is A Credit Score?

A credit score is a numeric portrayal consisting of three digits that reflects your financial trustworthiness. It is calculated based on your credit history, which includes your borrowing and repayment behaviour. Credit bureaus in India, such as CIBIL (Credit Information Bureau (India) Limited), Experian, Equifax, and CRIF High Mark, collect and maintain credit information on individuals and assign them credit scores. These scores typically range from 300 to 900, with a higher score indicating better creditworthiness.

Factors Impacting Your Credit Score

Your credit score is a crucial financial indicator that affects your ability to access loans, credit cards, and favourable interest rates. Understanding the factors that influence this score is essential for maintaining good credit health.

1. Payment History

One of the most significant factors impacting your credit score in India is your payment history. This factor accounts for 35% of your CIBIL score, making it the most crucial element. Your payment history reflects your ability to meet your financial obligations on time. Here’s what you need to know:

  • On-Time Payments: Consistently making on-time payments for credit cards, loans, and other debts has a positive impact on your credit score.
  • Late Payments: Missing payments or making late payments can significantly harm your score. Lenders report late payments to credit bureaus, which can stay on your credit report for several years.
  • Defaults: Defaulting on loans or credit cards by not paying them at all can have severe consequences for your credit score.
  • Collections: Accounts sent to collections due to non-payment can significantly lower your score. It’s crucial to resolve these issues promptly.

2. Credit Utilisation (30% of CIBIL Score)

Credit utilisation, also known as the credit utilisation ratio, is another critical factor affecting your credit score in India. It accounts for 30% of your CIBIL score and reflects the percentage of your available credit that you are currently using. Managing your credit utilisation is essential:

  • Low Utilisation: Keeping your credit card balances low relative to your credit limit is essential. A high level of credit utilisation can have an adverse effect on your credit score.
  • Credit Limit Increases: Requesting credit limit increases can help lower your credit utilisation ratio, but be cautious not to use this as an excuse to accumulate more debt.

3. Length Of Credit History (15% of CIBIL Score)

The length of your credit history plays a role in determining your credit score, accounting for 15% of your CIBIL score. This factor considers:

  • Age of Credit Accounts: The longer you’ve had credit accounts open, the better it is for your credit score. Avoid closing your oldest credit accounts.
  • Average Age of Accounts: A longer average age of your accounts can positively influence your score.

4. Credit Mix (10% of CIBIL Score)

Credit mix refers to the variety of credit types in your financial profile. This factor contributes 10% to your CIBIL score. A healthy credit mix typically includes:

  • Credit Cards: Revolving credit accounts like credit cards.
  • Instalment Loans: Loans with fixed monthly payments, such as personal loans, car loans, or home loans.

5. New Credit (10% of CIBIL Score)

New credit inquiries and accounts opened recently impact 10% of your CIBIL score. When assessing new credit, consider the following:

  • Recent Inquiries: Too many hard credit inquiries in a short period can negatively impact your score, as it may suggest you’re seeking credit desperately.
  • New Accounts: Opening multiple new credit accounts in a short time can also have a negative effect on your credit score.

6. Public Records And Derogatory Marks

Negative public records and derogatory marks, such as bankruptcies, tax liens, judgments, and legal actions, can significantly lower your credit score. These marks are reported by government agencies and stay on your credit report for several years.

7. Credit Age And Average Account Age

The age of your oldest credit account and the average age of all your accounts can affect your score. Older accounts tend to have a positive impact, so avoid closing your oldest accounts if possible.

8. Credit Card Balances

Maintaining high balances on your credit cards relative to your credit limit can hurt your score. Strive to maintain minimal balances on your credit cards.

9. Public Records

Negative public records, such as bankruptcies, tax liens, and legal judgments, can have a significant negative impact on your credit score. It’s important to promptly deal with and rectify these concerns.

10. Credit Inquiries

Whenever you seek credit, a hard inquiry is recorded on your credit report. Multiple hard inquiries within a short period can slightly lower your credit score. Exercise caution regarding the frequency of your credit applications.


The factors that impact your credit score are multifaceted and play a pivotal role in shaping your financial well-being. Your credit score is not merely a number; it’s a reflection of your financial responsibility and trustworthiness in the eyes of lenders and financial institutions. By consistently making on-time payments, managing your credit balances wisely, and maintaining a diverse mix of credit types, you can work towards a healthier credit score. Fibe Instant Cash Loan App India service has revolutionised the way people handle short-term financial challenges in India.