How Is Your CIBIL Score Calculated?
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How Is Your CIBIL Score Calculated?

  • Highlights

  • Your CIBIL score is a rating based on your credit history

  • CIBIL score is a three-digit score ranging from 300 to 900

  • High scores indicate high creditworthiness and vice versa

  • See how your score is calculated and be financially aware

Having a good CIBIL score gives you leverage while applying for a loan as it portrays you as a responsible and trustworthy borrower. This is because it consolidates your past credit history and repayment behaviour and provides a comprehensive picture to prospective lenders. A higher score makes you more creditworthy and vice versa. To understand this score better, learn how your CIBIL credit score is calculated.

Basics of Your CIBIL Score

This 3-digit numeric representation ranges from 300 to 900. In this CIBIL score range, 900 is considered to be the highest while 300 marks the lowest score. Thus, the higher your CIBIL credit score is, the more likely it is for you to get approval on your credit application. Typically, a score of around 750 or above is considered ideal to get your loan application approved.

Additional Read: Where To Check Your Credit Score

How is CIBIL score calculated?

- Repayment History

How you have repaid credit in the past makes up 35% of your CIBIL credit score. This is why missing EMI payments and defaulting on repayment of credit can severely diminish your score.

What Should Be Your CIBIL Score to Apply a Personal loan | Bajaj Finserv

- Type of Credit Taken and Repayment Duration

The type of credit you have availed also contributes to your credit score—10% of your CIBIL score to be precise. Only availing one type of credit does not help your score. Avoiding the use of credit completely does not help either. In order to create a positive 10% contribution, it is essential that you have a balance of credit. This means taking on both secured and unsecured loans. The duration of repayment contributes another 15% to your CIBIL score. This is based on the time you have been using the credit for, and whether you have been making timely payments or not.

- Existing Debt and Credit Utilisation

Your existing debt amounts to 30% of your CIBIL credit score. The same also reflects in your credit report. This is based on the amount of credit that has been sanctioned to you and how much of this amount you have used. Using too much credit in comparison to your income or reaching your credit card’s limit each month, for example, doesn’t reflect positively on your CIBIL credit score.

Additional Read: How To Repay Your Loan Faster

- Number of Credit Inquiries, Especially Unsuccessful Ones

Remember that each time you apply for credit, it reflects in your CIBIL report. So, making many loan inquiries in quick succession can harm your CIBIL credit score. This is because in such a situation, CIBIL thinks of you as credit-hungry, and as someone who is unable to survive within their means. Also, each rejection is also a mark on your score. This is because the lender you sought credit from probably didn’t find you to be financially capable. This is why if you are taking a personal loan or a home loan, for example, you must not apply until you are certain that you meet eligibility criteria and have a good chance of getting approval.

So, check your CIBIL credit score from time to time to ensure that your score is up to the mark. Besides, this will also help bring any errors to your attention. Reporting them and having them fixed will increase your credit score.

Additional Read: How To Get Personal Loan With Low CIBIL Score

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