How is Your CIBIL score calculated?

A CIBIL score is calculated based on several factors:

• Payment History (35%): Your payment history is the most significant factor influencing your CIBIL score, accounting for 35% of the overall calculation. Timely repayment of EMIs and credit card bills is crucial. Even a single missed payment can have a lasting negative impact on your score, as it signals to lenders that you might struggle with managing your finances. Consistently paying on time builds trust with lenders and reflects positively on your creditworthiness. If you’ve been diligent with payments over time, it shows a strong financial discipline, which can significantly boost your score.
• Credit Utilization (30%): Credit utilization is the second most important factor, contributing 30% to your CIBIL score. It refers to the ratio of your current credit card balance to your credit limit. Ideally, you should aim to keep this ratio below 30%. For example, if your credit limit is ₹1 lakh, try not to exceed ₹30,000 in outstanding credit. High credit utilization indicates a reliance on borrowed funds, which can be a red flag for lenders. On the other hand, maintaining a low utilization rate shows that you manage your credit responsibly, positively influencing your score.
• Credit History Length (15%): The length of your credit history plays a role in about 15% of your CIBIL score. This factor considers how long your credit accounts have been active. The longer your credit history, the more information lenders have to assess your credit behavior. An older account with a good payment record is valuable because it demonstrates long-term financial stability. It’s beneficial to keep older accounts open, even if you no longer actively use them, as closing them can shorten your credit history and potentially lower your score.
• Credit Mix and Types (10%): Credit mix, which makes up 10% of your CIBIL score, refers to the diversity of your credit portfolio. A healthy mix of credit types, such as secured loans (like home loans) and unsecured loans (like personal loans or credit cards), is favorable. It shows that you can manage different forms of credit responsibly. Relying solely on one type of credit might not have as strong a positive impact. Lenders prefer to see that you can handle a variety of credit types effectively, which indicates a lower risk of default.
• Recent Credit Behavior (10%): Recent credit behavior accounts for 10% of your CIBIL score. This factor includes the number of recent credit inquiries and the opening of new credit accounts. Multiple credit inquiries in a short period can lower your score as it might indicate financial distress or a higher risk of default. Lenders often view numerous recent applications as a sign of desperation for credit. To maintain a healthy score, it’s best to limit new credit applications and avoid taking on too many new loans or credit cards in a short time.

A high CIBIL score indicates good credit health, making it easier to get loans and credit cards.

Factors Influencing CIBIL Score Calculation

Your CIBIL score is a three-digit number that reflects your creditworthiness. It is calculated based on several factors:

1. Payment History: The most significant factor, contributing about 35% to your score. Regularly paying your EMIs and credit card bills on time boosts your score.
2. Credit Utilization Ratio: This refers to the percentage of your credit limit that you’re using. Keeping this ratio below 30% is ideal.
3. Length of Credit History: The longer your credit history, the better it is for your CIBIL score. This includes the age of your oldest account.
4. Credit Mix: A balanced mix of secured loans (like home loans) and unsecured loans (like personal loans) positively impacts your score.
5. Recent Credit Activity: Multiple recent loan applications can indicate financial distress and lower your score.

Benefits of Having a Good CIBIL Score

A good CIBIL score is like a passport to better financial opportunities. Below are the benefits:

1. Easier Loan Approvals: Banks and financial institutions prefer lending to individuals with high CIBIL scores, as it indicates lower risk.
2. Better Interest Rates: With a good score, you can negotiate for lower interest rates on loans and credit cards, saving money over time.
3. Higher Credit Limits: A strong CIBIL score often results in higher credit limits, giving you more financial flexibility.
4. Faster Loan Processing: Your loan applications are processed quicker, as lenders are more confident in your repayment ability.

What is the Ideal CIBIL Score You Should Have?

An ideal CIBIL score typically ranges between 750 and 900. A score within this range is considered excellent and opens doors to better loan offers, lower interest rates, and higher chances of approval. While a score above 700 is usually sufficient, aiming for 750 or higher is advisable to ensure financial institutions view you as a low-risk borrower.

Ideal CIBIL Score Rating for Different Types of Loans

Different loans have varying risk levels, and therefore, the ideal CIBIL score may differ slightly:

• Personal Loans: 750 and above is ideal due to the unsecured nature of the loan.
• Home Loans: 700 and above is generally acceptable, though higher scores may result in better terms.
• Car Loans: 700 and above is favorable, but lower scores might still qualify depending on other factors.
• Credit Cards: 750 and above is preferred for premium credit card approvals.

How to Remove My Name From CIBIL Defaulters’ List?

To remove your name from the CIBIL defaulters’ list:

1. Repay Outstanding Amounts: Clear any outstanding dues, including late fees and penalties.
2. Negotiate with Lenders: Sometimes, lenders agree to a settlement, where you pay a lump sum amount lower than the outstanding, and they mark the account as ‘Settled’ or ‘Closed’.
3. Request a No Dues Certificate: Once the payment is made, obtain a No Dues Certificate from the lender.
4. Dispute Errors: If there’s an error in your credit report, raise a dispute with CIBIL to correct it.
5. Wait for the Update: After taking these steps, it might take a few weeks for CIBIL to update your status.

How to Check CIBIL Score Online?

Checking your CIBIL score online is simple and can be done in a few steps:

1. Visit the CIBIL Website: Go to the official CIBIL website (cibil.com).
2. Create an Account or Log In: If you’re a new user, you’ll need to create an account by providing your personal details, including PAN card number. If you already have an account, just log in.
3. Provide Necessary Details: Fill in the details requested, such as name, date of birth, and address.
4. Verify Your Identity: You’ll receive an OTP on your registered mobile number for verification.
5. View Your Score: Once verified, you can view your CIBIL score. You can also download your credit report.

How Do I Check CIBIL Score by PAN Card?

Your PAN card is a key document linked to your financial history. To check your CIBIL score using your PAN card:

• Visit the CIBIL Website
• Enter PAN Details: During the sign-up process, you’ll be asked to provide your PAN card number.
• Complete the Form: Fill in other necessary details like name, date of birth, and address.
• Verify and Submit: Complete the verification process via OTP.
• Access Your Score: After successful verification, your CIBIL score will be displayed, linked to the PAN details you provided.

Improving Your CIBIL Score

Improving your CIBIL score is essential for better financial opportunities. Here’s how you can do it:

• Use Credit Responsibly: Use credit wisely and avoid unnecessary loans or credit cards. Only borrow what you can repay comfortably, ensuring you don’t fall into a debt trap.
• Avoid Late or Missed Payments: Timely payments are crucial. Set up reminders or auto-debit options to ensure you never miss a due date, as late payments significantly hurt your CIBIL score.
• Maintain a Low Credit Utilization Ratio: Keep your credit utilization ratio below 30%. If your credit card limit is ₹1 lakh, try not to spend more than ₹30,000 on it to maintain a good score.
• Make Sure to Close Accounts: If you no longer use a credit card or have paid off a loan, make sure to officially close the account. An open, unused account can negatively impact your score.
• Review Your Credit Report: Regularly check your credit report for errors. Any discrepancies should be immediately reported to CIBIL for correction. Even small errors can negatively impact your score.

Difference Between CIBIL, Equifax, Experian & High Mark

CIBIL, Equifax, Experian, and High Mark are credit bureaus in India that calculate credit scores based on your credit history:

• CIBIL: The most commonly used credit bureau in India, with scores ranging from 300 to 900.
• Equifax: Provides a similar scoring system and is widely recognized globally.
• Experian: Another major global player, Experian’s credit score also ranges from 300 to 900.
• High Mark: A newer entrant in the Indian market, High Mark also provides credit scoring services, especially in the microfinance sector.

Each bureau may have slight variations in how they calculate scores, but all provide an assessment of your creditworthiness.

FAQs about “How is Your CIBIL score calculated?”

What CIBIL Score is Considered Good?
A CIBIL score of 750 and above is considered good. It reflects your ability to manage credit well and indicates to lenders that you are a low-risk borrower.

What are the Advantages of Having a Good CIBIL Score?
Having a good CIBIL score comes with numerous advantages, such as easier loan approvals, better interest rates, higher credit limits, and faster loan processing.

Is My Credit Score and My CIBIL Score One and the Same Thing?
Yes, your CIBIL score is a type of credit score, specific to the credit bureau CIBIL. While ‘credit score’ is a general term, ‘CIBIL score’ refers to the score given by CIBIL.

Does SBI Have its Own CIBIL Score?
No, SBI does not have its own CIBIL score. SBI, like other banks, uses the CIBIL score or other credit scores (like those from Equifax, Experian, etc.) to assess the creditworthiness of customers.

How Can I Check My CIBIL Score Online at No Cost?
You can check your CIBIL score for free once a year by visiting the CIBIL website and registering your details. Some third-party websites also offer free credit score checks.

Will a Loan Rejection Affect My CIBIL Score?
A loan rejection itself does not directly impact your CIBIL score, but the hard inquiry made by the lender when you apply for the loan might cause a slight dip in your score.

Which One is a Good Score, 650 or 772?
A score of 772 is considered very good, while 650 is on the lower side. A score of 772 will give you better chances of getting loans approved with favorable terms.

How Frequently Does Your CIBIL Score Get Calculated Monthly or Yearly?
Your CIBIL score is updated every month as lenders report your credit activity to CIBIL on a regular basis.

Can I Check My CIBIL Score Myself Without Impacting My Score?
Yes, checking your CIBIL score yourself is considered a ‘soft inquiry’ and does not impact your score.

How to Calculate the CIBIL™ Score for a Personal Loan?
CIBIL doesn’t calculate scores based on specific loan types. Your overall credit behavior, including how you manage personal loans, contributes to your CIBIL score.

How to Calculate the CIBIL™ Score for Education Loan?
Similar to other loans, your CIBIL score for an education loan is based on your overall credit history, including timely payments and credit utilization.

How to Calculate the CIBIL™ Score for a Home Loan?
Your CIBIL score for a home loan is calculated based on your overall credit history. Maintaining a good score involves timely EMI payments and a balanced credit portfolio.

Does My Credit Score Get Affected by My Salary?
No, your salary does not directly affect your credit score. However, your ability to manage your income and debt efficiently does impact your score.

How CIBIL Score Impacts Loan & Credit Card Eligibility?
A higher CIBIL score increases your chances