Being rich is no guarantee of a high CIBIL score. And being not-so-rich does not imply a poor credit score either. Likewise, being employed in a multinational corporation (MNC) doesn’t mean your credit score would be high, and being jobless also doesn’t adversely impact the score always.
So, one may say that employment status of a credit seeker does not influence the CIBIL score directly. However, this may still impact your credit score through its impact on the ability to make timely payment.
A number of factors that are responsible for employment status to influence credit score include the following: ability to repay, credit application approval, credit utilisation, credit limit and loan amount.
Factors which influence your credit score:
Income stability: Your employment status impacts your income stability, which influences your ability to repay debts. Banks often consider your income source and stability when assessing your creditworthiness.
Ability to repay: Employed individuals usually have a more stable income stream, making them more likely to repay loans on time. This influences their credit score positively. Unemployment may lead to difficulties in repaying debts, potentially affecting the credit score adversely.
Credit application approval: Some banks may require proof of employment as part of the credit application process. Being employed can raise your chances of credit approval, particularly for certain types of loans.
Credit utilisation: Employed individuals may have better access to credit, such as credit cards or personal loans, and when managed responsibly, can positively impact their credit score through a healthy credit mix and payment history.
Credit limit and loan amount: Banks may also consider borrower’s employment status at the time of determining credit limit on credit cards or the loan amount for personal or home loans.
Higher income levels associated with employment may leads to higher credit limits or loan amounts, which, if managed responsibly, can impact credit scores positively.
So, it’s important to maintain a stable income, manage credit responsibly, and make timely payments regardless of your employment status to maintain a good credit score.
Frequently Asked Questions:
What is a CIBIL score?
It is a three-digit numeric summary of your credit history. It ranges from 300 to 900, with 900 being the highest score.
Which are the other credit rating agencies?
Credit scores are provided by several bureaus and agencies. Other credit bureaus include Experian, Equifax, and CRIF High Mark.
How is a credit score different from CIBIL?
Credit score is a more generic term that refers to a numeric representation of an individual’s creditworthiness.
How is a credit score calculated?
This score is calculated based on your credit history, including your credit accounts, payment history, outstanding debts, length of credit history, and recent inquiries.
To improve your credit score, what is the first thing borrowers should do?
First and foremost, borrowers should check their credit report. They should obtain a copy of their credit report from CIBIL. They should also review it for any errors or discrepancies that could be dragging their score down.
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Published: 09 Apr 2024, 08:11 AM IST