There are several important factors which reflect on a credit report or credit files and those that also compute the CIBIL score. These factors have proportionate influence on a credit score computing.
1. Payment History: This factor influences the credit score upto 35%.
All the payments that have been made in the past, on loans and credit cards impact the credit score. To have a good score, there has to be a payment history over a considerable period of time, on all credits – means, payments made in full and payments made on time. Any delays in payments can be detrimental. Or any payment although made on time, but a few days past the due date, can also harm the CIBIL score.
2. Outstanding Balances / Overdue Amount: This factor impacts the credit score computing upto 30%.
If you have had any overdue or outstanding amount on your secured loans or credit cards at the time of reporting, it can influence the credit report negatively.
3. Account Age / Tenurity: Impacts the credit score upto 15%.
The duration or period of loan or credit that has been taken by the applicant. This is always based on a credit card [unsecured loan] or secured card [secured loan or fixed trade line].
4. Credit Type: Impacts the credit score upto 10%.
This is the indication of unsecured:secured loans. Ideally, this ratio should be in the 3:2 number. The reason for this ratio is, that people prefer to go for an unsecured loan on priority basis as it does not involve a security cover or collateral. Hence, the percentage of unsecured loans available with people will be higher than a secured loan account. So, the CIBIL score calculation becomes convenient on the basis of higher percentage of unsecured loans and their data available.
5. Enquiries: Impacts the score upto 10%.
This indicates all the loan enquiries that a borrower has logged in at different lending institutions or banks. It could be enquiries for secured loans or credit cards. This also indicates the number of times, lenders have accessed one's credit reports from Bureaus. Large number of enquiries that reflect on a report indicates that the person is credit hungry or it could also mean that their loan application has been rejected several times. An underwriter reviewing this section could become suspicious of large number of enquiries.
These are some of the major factors influencing a credit report or cibil score calculation. Other than those listed above, there are many other factors as well. Negative Flags listed on one's report could also be an influencer. More the number of negative flags, lesser the score and lower the chances of loan approval. While some negative flags could be negated once the issue is settled by both the parties, there are some that can never be dissolved. The decisions based on these characters vary from bank to bank and every underwriter or analyzer views them from different perspective depending upon their policies and terms.
Reporting errors could also influence a credit score to an extent.