How Is Your CIBIL Score Calculated?

Initiated by the RBI or Reserve Bank of India, the CIBIL or Credit Information Bureau (India) Ltd is an authorized credit agency that checks for the CIBIL scores as reports for everyone. A CIBIL score (which is a three-digit number) is one of the most important factors that assesses or examines your creditworthiness. The score has a range from - 300-900 (with 900 being the highest and 300 the lowest) that lenders check while evaluating your loan application. Available data shows that 90% of loan applications are approved for those applicants with a CIBIL score of 750 or above. So, it's important to understand how the score is calculated. This is NYK. In this video we bring you some important factors that are taken into account while determining your CIBIL

  1. Payment history
    Payment history is one of the important factors that can affect your CIBIL score in a negative or a positive way. So, if you pay your unpaid bills associated with your credit cards& loan EMIs in a timely manner, it will surely boost your score. And if you miss any of your payments or in case of delayed payments, it will have a negative impact on your score. That's why, such payment behaviour should be avoided to keep your credit score high.

  2. Credit mix and duration
    The kind of credit you have taken – unsecured or secured, and the duration of credit history also plays a considerable role in calculating your CIBIL score. A good mix of unsecured loans (for example a personal or credit card loan) & secured loans (for example a car loan or home loan) could have a positive impact on your score if repaid on time.

  3. Credit utilization
    It is the amount of credit you are using against the total credit you have available. Experts suggest that one should ideally not go beyond 30% of your credit limit. For example, if your credit card limit is Rs.1 lakh, then you should not spend more than 30K. In case, if you have exceeded over 50% of your credit limit, it can have a negative effect on your score.

  4. The number of hard inquiries

Besides the important points already mentioned, the number of times you have applied for credit will impact your CIBIL score negatively. There fore, it is advisable to only apply to those financial institutions that you are sure will accept your application.

These are the four key factors that impact your CIBIL score! Therefore, it is vital to take necessary measures to maintain a high credit score.