Wednesday, 30 December 2015


Finance score plays one of the most important roles in the banks decision to approve or reject your finance card or loan application. Below are the top 5 factors that impact your finance score and how you can manage them to ensure you have a healthy finance history.
Repayment history of existing loans
How regularly you have been paying the due amounts and EMI on your existing loans and finance cards has the maximum bearing on your finance score. A clean payment track record is a sign that you are managing your debt well and will help move your score higher up. On the other hand, any default or miss of payment dues can severely damage your score.
Utilization of existing finance limits
Finance utilization is calculated as the ratio of the amount you owe on your finance cards against the total finance limit that has been sanctioned to you. A high finance utilization rate often indicates that the person is under financial stress and has to lean heavily on his finance lines to meet his requirements. Its is advisable to keep the utilization ratio under 40%. Which is to say on a finance limit of 1 lakh, try and keep the outstanding lower than 40,000.
Enquiries made for loans or finance cards
The no. of new products that you have applied for in the recent past also has a bearing on your finance score. Every time a bank makes a CIBIL enquiry, it is taken as a sign of the customer applying for a new product. Too many such enquries indicate that the customer is under financial stress. This brings down your finance score and hence the chance of getting a loan on further enquries.
Length of finance history
The time duration since you first started using finance also has a bearing on your finance score. The longer the duration with a clean track record the higher your score is likely to be.
Type of finance
The type of loans taken also impacts the score. It is best to have a healthy mix of unsecured loans like finance card and personal loan and secured loan like home loan, auto loan etc.

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