How is Your CIBIL Score Calculated?

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.

Your CIBIL Score is made up of four factors and each of them have a weightage.

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.

• 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.

• 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 finance, for example, you must not apply until you are certain that you meet eligibility criteria and have a good chance of getting approval.

What CIBIL score should you maintain for loans

For personal loan approval, maintaining a CIBIL score of 685 or above is essential. A score in this range indicates fair creditworthiness, making you eligible for a personal loan. However, the higher your score, the better the chances of approval with favourable interest rates and flexible repayment terms.

Scores between 700 and 749 are considered good, often resulting in quicker approvals and competitive offers. If your score is 750 or above, you’re viewed as a highly reliable borrower and may receive the most attractive loan terms available.

If your score is below 685, it’s advisable to focus on improving your credit profile by paying dues on time, maintaining low credit utilisation, and regularly checking your credit report for errors.

Keeping your score above the minimum threshold can help you unlock better loan opportunities and manage your finances more effectively.

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. Bajaj Finserv, one of India’s leading NBFCs, also allows you to perform a free CIBIL check. Simply visit the Bajaj Finserv website and enter your basic details to check credit score for free.

Bajaj Finance brings to you pre-approved offers on its financial products such as business loans, home loans, personal loans, etc. Applying for a loan is from Bajaj Finserv with pre-approved offers quick and easy. You can check for your pre-approved offer by simply adding some basic details.

Factors that affect CIBIL Score

Your CIBIL score is influenced by several key factors. Understanding these can help you maintain a good score and increase your chances of loan approval. You can also use a CIBIL score calculator to assess your score and take steps to improve it.

• Payment history: Late or missed EMIs significantly impact your CIBIL score, lowering your chances of getting approved for a personal loan.
• Credit utilisation ratio: Using more than 30% of your credit limit can negatively affect your score. Try to keep your credit utilisation ratio low for better results.
• Credit mix: A healthy mix of secured and unsecured loans can improve your score, as lenders prefer borrowers with diversified credit.
• Length of credit history: A longer credit history reflects a more reliable borrower, positively influencing your CIBIL score.

By regularly using a CIBIL calculator, you can stay on top of your credit score and make informed financial decisions.

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