Credit score: What are the different models to calculate? 4 key factors that influence it? | Mint

Two important resources for managing your own financial affairs are your credit score and your credit report. But the landscape of credit scoring can be a bit confusing given the many forms of scores and reports that are out there. The many varieties of credit scores and reports are outlined in this article along with their significance and how knowing them can help your money management skills.

What is a credit score?

A credit score is a three-digit figure that can be calculated from data obtained from your credit history. Some of the elements include repayment history, number of credit accounts, and overall debt. These are some of the credit factors, and the bureaus check all of them to decide whether the individual is credit-worthy or not.

Which credit-scoring models are there?

There are four major credit bureaus, namely CRIF High Mark, Equifax, Experian, and CIBIL that have been authorised by Reserve Bank of India (RBI) to calculate credit scores. Proprietary algorithms used by each agency also result in relatively small differences in the outcomes from different agencies. All four credit agencies give reliable credit scores.

What are the different types of credit score?

Let’s look at the various credit score models rating companies use:

In conclusion, it calls for understanding the different credit reports and ratings to make smart financial decisions. You can spot any errors and monitor your credit-building journey, being ahead of the game in increasing your score by regularly reviewing your credit reports. Other than boosting your financial profile, a healthy credit score keeps you ahead with regard to obtaining future loans and good terms on credits.