Hey learners,
If you are planning to apply for a loan or a credit card in India, understanding your CIBIL score is crucial. The CIBIL score plays a significant role in determining your eligibility for credit and the terms you'll be offered. This article explains what a CIBIL score is, how it is calculated, and the key factors that affect it.
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| What is CIBIL Score and How It Is Calculated? |
What is a CIBIL Score?
A CIBIL score is a three-digit numeric summary of your credit history, ranging from 300 to 900. Maintained by TransUnion CIBIL, one of India’s leading credit information bureaus, this score indicates your creditworthiness.
*The full form of CIBIL is Credit Information Bureau (India) Limited
The higher your CIBIL score, the better your chances of getting credit approvals at favorable interest rates. A score above 750 is generally considered excellent.
CIBIL Score Range and What It Means
| CIBIL Score | Creditworthiness | Meaning |
|---|---|---|
| 750 - 900 | Excellent | Strong credit profile, easy loan approvals |
| 700 - 749 | Good | Generally approved, may get favorable terms |
| 650 - 699 | Fair | May get credit, but with stricter terms |
| 550 - 649 | Poor | High risk, difficult to get approvals |
| 300 - 549 | Very Poor | Low score, high chance of rejection |
How is CIBIL Score Calculated?
The CIBIL score is calculated using data from your credit report, including your loan and credit card activity. Here are the main factors that influence the score:
1. Payment History (35%)
Timely repayment of EMIs and credit card bills is the most important factor. Delays, missed payments, or loan defaults can significantly reduce your score.
2. Credit Utilization Ratio (30%)
This is the percentage of your credit limit that you use. Keeping this ratio below 30% shows financial discipline and positively affects your score.
3. Length of Credit History (15%)
The older your credit accounts (like credit cards or loans), the better. A long and clean credit history helps build trust with lenders.
4. Credit Mix (10%)
Having a balanced mix of secured (home, car loans) and unsecured (credit cards, personal loans) credit reflects sound credit behavior.
5. Recent Credit Inquiries (10%)
Every time you apply for a loan or credit card, a lender checks your credit report. Too many recent inquiries suggest credit-hungry behavior and can reduce your score.
Additional Factors That Impact CIBIL Score
- Number of Active Accounts: Managing too many loans or cards poorly can negatively affect your score.
- Settled or Written-Off Loans: If you’ve settled a loan without full repayment, it will reflect poorly in your credit report.
- Co-signing Loans: If you’re a guarantor for a loan and it defaults, your score may drop too.
- Outstanding Dues: Any unpaid credit card bills or EMIs lower your credibility.
Tips to Improve and Maintain a Good CIBIL Score
- Always pay bills and EMIs on time
- Use credit cards wisely and keep utilization below 30%
- Maintain older credit accounts for a longer history
- Avoid applying for multiple loans at once
- Check your credit report regularly and correct errors
How to Check Your CIBIL Score?
You can check your CIBIL score for free once a year on the official TransUnion CIBIL website: https://www.cibil.com
Your CIBIL score is a key indicator of your financial health. Whether you're applying for a home loan, car loan, or credit card, a high CIBIL score increases your chances of approval and gives you better financial leverage.
By managing your credit responsibly and understanding the factors that affect your score, you can build and maintain a strong credit profile.
Frequently Asked Questions on CIBIL SCORE
1. What is a CIBIL Score?
A CIBIL score is a three-digit numeric summary of your credit history, ranging from 300 to 900. Maintained by TransUnion CIBIL, it indicates your creditworthiness. Higher scores suggest better credit profiles, increasing the likelihood of loan approvals at favorable interest rates.
2. How is the CIBIL Score calculated?
The CIBIL score is calculated based on several factors: Payment History (35%), Credit Utilization Ratio (30%), Length of Credit History (15%), Credit Mix (10%), and Recent Credit Inquiries (10%).
3. What does a good CIBIL Score range look like?
CIBIL scores range between 300 and 900. A score between 750-900 is considered excellent, 700-749 is good, 650-699 is fair, 550-649 is poor, and 300-549 is very poor.
4. What factors negatively impact the CIBIL Score?
Late payments, high credit utilization, short credit history, lack of credit mix, too many credit inquiries, and defaulted or settled loans can negatively impact your score.
5. How can I improve and maintain a good CIBIL Score?
Pay EMIs and bills on time, keep utilization low, maintain older accounts, avoid multiple loan applications, and check your credit report for errors.
6. How can I check my CIBIL Score?
You can check your CIBIL score for free once a year on the official TransUnion CIBIL website: https://www.cibil.com