Credit Score: A Short Introduction

A credit score is a numerical representation of creditworthiness, reflecting how likely you are to repay borrowed money.

- PV SUBRAMANYAM

It's calculated based on your credit history and is used by lenders to assess the risk of lending to you. Credit scores range from 300 to 850, with higher scores indicating better credit. Most common models are Transunion Cibil, Experian, Equifax, etc.

Factors affecting credit score

• Payment history (35%): Whether you pay bills on time. Late or missed payments, or defaults hurt your score.

• Credit utilization (30%): The ratio of credit card balances to credit limits. Lower utilization is better.

• Length of credit history (15%): The age of the oldest account, average age of accounts, and age of newest accounts.

• Types of credit (10%): A mix of credit types (credit cards, mortgages, auto loans) can positively impact your score.