What is CIBIL score & how it is calculated?

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Your CIBIL Report and CIBIL TransUnion Score not only determine whether or not you qualify for a loan, but it may also have an impact on the terms and conditions on which you can avail the loan.

Today almost no loan or credit card application gets approved without checking the applicant's CIBIL report and CIBIL TransUnion Score. Ever wondered how a person's credit score is calculated? Here's a quick glimpse into what goes into the making of a person's CIBIL TransUnion Score:


What is a CIBIL TransUnion score?

CIBIL calculates an individual's credit score through advanced analytics and assigns a number between 300 and 900 to a borrower, based on his/her credit history. The closer your score to 900, the more confidence the credit institution will have in your ability to repay the loan and hence, the better the chances of your application getting approved. While each bank will have its own credit scoring cut-off based on the credit sanctioning policies, it has been observed that most banks are lending to consumers with a CIBIL TransUnion Score of 750 and above.

The banks rely on the credit score to offer you a new line of credit may it be a credit card or a loan. Earlier they just had to believe the word of the prospective borrower and the lenders would estimate if the applicant is good for the loan or not. Most often the liable people would get rejections and the liars and cheaters would find their way to cheat the credit managers and cheat the lenders.

CIBIL (Credit Information Bureau of India Limited) became the first of such an organisation to start collecting credit information that was contributed by their members and maintained the borrower’s records. The CIBIL TransUnion score is measured out of 900 which provides the lender a clear indication of the applicant’s liability based on his credit history.


How is the score calculated?

While each credit information company has its own proprietary algorithm to calculate an individual's credit score, the most important elements of the score composition are centric around the loan payment behavior of the individual. Your CIBIL TransUnion Score is calculated based on the information in the "Accounts" and "Enquiry" section of your CIBIL Report. The score is calculated based on the following factors – an overview:

Credit Utilization: How much credit is the consumer using?

Defaulting/Delinquency: How many accounts are past due and by how many days?

Trade Attributes: How old are this consumer's lines of credit? What type of credit does he have? Does the consumer have a good mix or balance of credit or is it all credit cards?


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The CIBIL score is calculated based on the following factors:

The applicant’s repayment history:

The repayment history accounts to 35 percent of the score. Therefore you need to clear all your bills and loans well within the due date to maintain a good repayment history. If you default even once, it will negatively impact your score.

The credit balance:

The amount you owe to the lender accounts to 30 percent of the CIBIL score. There are two considerations with regard to this, the first being the total credit limit that is being sanctioned to you and the second being how much of the credit have you utilised. The credit utilisation ratio is calculated as the balance that is outstanding on your credit cards and loans. If you have made most use of the credit, then your profile will be considered as ‘risky’.

The amount of time for which you have used credit:

This is an important factor as well and it accounts to 15 percent of the score. If you have been servicing the loan for a longer period and handled it responsibly and made timely payments, then it will positively affect your CIBIL score.

New credit that you have applied or taken:

This accounts to 10 percent of the credit score. Each time you apply for a credit, the lender will run a credit check on you and if there are too many inquiries going through, it will negatively impact your credit score.

Credit mix:
This accounts to another 10 percent of the CIBIL score. If you are avoiding credit like a plague and just opted for a single type of credit, it is not helping you have a good credit score. You need to have a mix of secured and unsecured loans. This means you must have a mix of the different types of credit that is mortgage, personal loan, car loan, credit card etc. Having the right mix will increase your credit score rather than having just one type of credit.

Here is a breakup of the various factors that impact the CIBIL Transunion Score:

1. Past Performance: Individuals past performance on their debt obligations is the most important criterion and contributes approximately 30 per cent weightage to the score

2. Credit Type & Duration: Type of loan availed whether secured or unsecured loan, and the duration of credit history established contributes an additional 25 per cent to the score.

3. Credit Exposure: The total amount of credit exposure contributes another 25 per cent

4. Other factors: Other factors such as credit utilization, recent credit behavior contribute the remaining 20 per cent to the score.


Your CIBIL Report and CIBIL TransUnion Score not only determine whether or not you qualify for a loan, but it may also have an impact on the terms and conditions on which you can avail the loan. The higher the credit score, the better your chances of availing the loan faster and on favorable terms. It is advisable to check your CIBIL Report and CIBIL TransUnion Score before applying for a loan. Timely payments of loan EMIs is most important for maintaining a good credit history and a healthy credit score.


Keep in mind that your credit score affects your application approval and rejection and it also affects the terms and conditions that the lenders offer. If you have a higher credit score, you will be at a position to bargain for relaxed terms and conditions and also for a lower rate of interest. Check your credit report often and make sure that all the details entered are accurate and right to your fullest knowledge. If there is any wrong information recorded, then fix it at the earliest and then apply for the loan only when the score is adjusted. Make sure the EMIs are paid on time and don’t build up balances on your credit cards, clear them off as the month ends.

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