How is the Crif Score Calculated? Practices That Negatively Effect the CRIF Score
h4<>CRIF Score: What Does it Mean?
CRIF score is a global credit index or score generated to denote the trustworthiness of a customer. CRIF score meaning is a three-digit score in the range between 300 and 900. A high score signifies more creditworthiness of you, and similarly, a low score represents low reliability. Usually, a CRIF credit score above 700 or 750 is a sound score. This value represents the experiences of a lender with previous credits or loans with you. If you have paid previous ones from time to time, you will eventually have a higher CRIF score. Consequently, the lender will be confident to provide you with the next one.
CRIF is an international credit bureau which is mainly dominant in Asia and Europe. Although, this company acquired High Mark in 2014, which is licensed to maintain a credit bureau in India by the Reserve Bank of India (RBI). Hence, today it is CRIF High Mark.
The CRIF score is of two types. Personal CRIF credit score is to define individual credits, while Business credit score generally signifies credit scores of commercial enterprises and corporations.
In the world of e-commerce, your CRIF score signifies much more intuitions rather than just loan repayment. Often, Insuring agencies look for credit scores to determine the premiums. Sometimes, landlords use this score too to decide whom to lend. So, the CRIF score is more of a commercial tool to denote your worthiness. Having a good score of more than 750 would help you to achieve the most convenient insurance of loans in the market. In this way, you would be a beneficial customer.
How is the CRIF Score Calculated?
Generally, the credit bureaus of each country are responsible for calculating credit scores. There are a variety of factors that play a very crucial role in the CRIF credit score calculation. The significant parameters are credit age, payment history, credit type, and credit utilization.
- The Credit Utilization Ratio (CUR): Credit usage is one of the two most prominent factors in determining the CRIF score. This ratio implies the fraction of credit you use or have used in comparison to the limit you are allowed to use. Your all-over outstanding balance is divided by the total credit limit you have for generating the Credit Utilization Ratio. Credit usage of around 30% to 40% is necessary to maintain an impressive score.
- The History of Repayment: Along with usage ratio, repayment is also another most vital factor. It is a crucial part to calculate the value of the CRIF credit score. Bureau tracks the history of loans, bills, and EMI repayment history. Hence, time to time delivery of dues indulges having a sound score. This history assures the lender that you are a genuine and reliable customer and will not cause casualties. On the other hand, missing several payment deadlines will result in a low score and, therefore, delay in achieving further financial assistance. It is a high impact factor.
- Credit Age: A long credit history often helps to determine the trustworthiness of you. Whereas, short credit history does not make the scoring procedure confident enough to rely on you. Hence, it is good to keep a credit card of long history rather than a new one.
- Account Total: It is a less significant factor in comparison with the previous ones. The mixed credit value of secured and unsecured types will help improve the overall CRIF credit score.
What Are the Practices That Negatively Affect the Crif Score?
So far, we have talked about CRIF score meaning, CRIF score range, and what a good CRIF score is. Now, let's take a look at some of the practices which harm the score.
- Lack of timely repayment of EMIs: Whenever you fail to pay an equated monthly installment (EMI), your CRIF CIBIL report would take a hit. With every missed EMIs or your payment dues, your CRIF score would decrease. In other words, a low CRIF credit score portraits your pending equated monthly installments.
- Lack of timely payment of credit cards: In recent times, when it comes to purchasing something, people tend to use credit cards more often than before. What is concerning is that the debt on credit cards keeps on stacking. It harms your credit score very much. Heavy usage of credit cards has an adverse effect on your CRIF CIBIL score. Using multiple credit cards would let your credit score go down as well. Therefore the timely due payment of a credit card is crucial for a good CRIF score.
- Unsecured loans: If you have multiple unsecured loans that are due, your credit score will eventually fall. If you have several loans against your name, your CRIF CIBIL report will surely experience a huge setback. So it is better to take one loan at a time to avoid hurting your credit score.
Now, as you know about the negative impacts, it is time to know about the remedies. Let's take a look at the steps on how you can improve your credit score and make it a good one.
- First of all, loans play a significant role in controlling your credit score. So, if you apply for a loan, make sure you completely clear all the debts before applying for another. Proper maintenance of the CRIF credit score would help you take loans as per your need in the future. Hence, long term loans are always preferable.
- Keeping an old credit card helps increase your credit rating. It improves your credit history. Thus, it will generate a sound score. When you cannot clear the dues, you should opt to close that card. But you should always look to keep an older credit card as it enhances your CRIF score.
- As mentioned earlier, the untimely payment of EMIs makes a mess of your CIBIL score. So, it is always advisable to repay your pending installments on time to avoid any kind of consequences.
- It is better to consult with your bank and set a monthly limit on your credit card. In this way, you can minimize using your credit card too much. Hence, your credit score gets improved.
In this article, you get a clear idea about the CRIF score range, CRIF high mark score meaning, negative practices that affect the CIBIL score, and ways to improve the score.
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