Credit Score
How is CIBIL score calculated?
Your credit score is pivotal in your financial journey, as it determines your eligibility for loans and credit cards. Among various credit scores available in India, the CIBIL score is the most recognised and widely used by lenders. Understanding how the CIBIL score is calculated can significantly improve your chances of securing credit on favourable terms.
This comprehensive guide explains the intricacies of how is CIBIL score calculated, the factors that influence your score, and provides practical ways to check and improve it. By understanding these elements, you'll be better equipped to maintain a healthy credit profile and access financial products when needed.
What is a CIBIL score?
A CIBIL score is a three-digit number ranging from 300 to 900 that reflects your creditworthiness and financial discipline. Developed by TransUnion CIBIL, this score serves as a quick reference for lenders to evaluate your credit risk. The closer your score is to 900, the better your financial standing appears to potential lenders.
This score isn't just a random number; it's a calculated assessment of your credit history and behaviour.
Generally, a score above 750 is considered excellent, positioning you as a low-risk borrower who's likely to receive credit approvals with favourable terms. Scores between 700 and 750 are considered good, while those below 700 may raise concerns among lenders. If your score falls below 550, you'll likely face challenges in securing credit or may receive offers with higher interest rates and stricter terms.
How CIBIL score is calculated?
If you are wondering, 'How to calculate my CIBIL score', you don't have to worry. The CIBIL score formula follows a structured approach similar to the FICO scoring model used internationally. TransUnion CIBIL analyses your credit information report (CIR) to generate your score, examining your credit behaviour over time rather than focusing on a single financial event.
To calculate your CIBIL score, the algorithm assigns specific weightage to different aspects of your credit history:
- Payment history (30%): This evaluates your track record of repaying loans and credit card bills. Timely payments boost your score, while defaults and delays significantly reduce it.
- Credit utilisation/exposure (25%): This measures how much of your available credit you're currently using. Lower utilisation rates are viewed positively.
- Credit type and duration (25%): This considers the length of your credit history and the mix of credit products in your portfolio.
- Other factors (20%): This includes multiple credit inquiries, new credit accounts, and other variables that might indicate financial stress.
The CIBIL score calculation process is continuous and updated periodically as lenders report new information. Each component contributes to your final score, with certain factors carrying more weight than others based on their predictive value for credit behaviour.
Factors affecting CIBIL score calculation
Understanding the specific factors that influence your CIBIL score can help you make informed financial decisions. Here's a detailed breakdown of what affects your CIBIL score formula during calculations:
Payment history (30%)
Your repayment behaviour forms the largest component of your CIBIL point calculation. Even a single missed payment can significantly impact your score. According to reports, a 30-day delinquency can reduce your score by approximately 100 points. This factor examines:
- Timeliness of EMI (equated monthly instalment) payments
- Credit card bill payment patterns
- Defaults or settlements
- Loan write-offs
Credit utilisation ratio (25%)
This ratio compares the amount of credit you're using to your total available credit. Financial experts recommend keeping this ratio below 30%. For example, if your credit card limit is ₹1,00,000, aim to keep your outstanding balance under ₹30,000. High utilisation suggests financial strain and dependency on credit, which lowers your CIBIL point calculation.
Credit age and mix (25%)
This factor evaluates:
- Length of credit history: A longer credit history provides more data for assessment and generally contributes positively to your score.
- Types of credit: A healthy mix of secured loans (such as Home or Auto Loans) and unsecured credit (like Credit Cards) demonstrates your ability to manage different credit products responsibly.
Hard inquiries and new credit (20%)
Each time you apply for credit, lenders perform a hard inquiry on your credit report. Multiple inquiries in a short period can lower your score as they may indicate financial distress. Additionally, opening several new credit accounts simultaneously can be viewed negatively.
How to check your CIBIL score?
Monitoring your credit score regularly is essential for maintaining financial health. Here are the primary methods for CIBIL point calculation:
Official CIBIL website
- Visit TransUnion CIBIL website.
- Select 'Get Your Credit Score'.
- Provide the required personal information.
- Select your subscription plan.
- Verify your identity through an OTP (one-time password).
- Make the payment if applicable.
- Access your credit report and score.
Through Banking Partners
Many banks and financial institutions now offer free CIBIL point calculation to their customers. You can check through your net banking portal or mobile banking app.
Third-party Platforms
Several fintech platforms provide free credit score checks. These services typically offer one free check per month or quarter.
To calculate your CIBIL score accurately, it is recommended to check directly through official channels rather than relying solely on unofficial calculators. Regular monitoring helps track improvements and identify potential issues before they affect your creditworthiness.
Conclusion
Understanding how the CIBIL score is calculated empowers you to take control of your financial future. By recognising the weight given to different aspects of your credit behaviour in the CIBIL score formula, you can make strategic decisions to improve and maintain a healthy score. Remember that your CIBIL point calculation isn't static—it evolves with your financial behaviour. Consistent, responsible credit management, including timely payments, moderate credit utilisation, and a diverse credit mix, can gradually improve your score. Conversely, missed payments, defaults, and excessive credit applications can quickly damage it.
For individuals seeking financial assistance, Axis Bank's Personal Loans offer competitive interest rates based on your credit profile. With the bank's Personal Loans, you can address various financial needs while building a positive credit history through timely repayments. These loans feature quick approval processes, minimal documentation, and flexible repayment options tailored to different credit profiles.
Also Read: How To Improve Your Credit Score?
FAQs
How often is my CIBIL score updated?
Your CIBIL score typically updates every 30-45 days, depending on when your lenders report information to the credit bureau. Most financial institutions report customer data every month, although the exact timing varies. It's advisable to check your CIBIL point calculation quarterly to monitor changes effectively. You can check your score online without hampering it.
How do late payments impact my CIBIL score?
Late payments have a significant negative impact on your CIBIL point calculation, with the severity of the effect depending on the extent of the payment delay. A payment that's 30 days late can reduce your score by approximately 80-100 points, while payments delayed by 60 or 90 days cause even greater damage. These late payment records remain on your credit report for up to 36 months, though their impact diminishes over time if you resume making timely payments.
Is my CIBIL score affected by my income?
No, your income doesn't directly affect your CIBIL score. The CIBIL point calculation doesn't consider your salary, profession, or employment status. Instead, it focuses on how you manage credit, regardless of your income level. However, income indirectly influences your score by affecting your ability to make timely payments and maintain low credit utilisation.
Lenders separately consider your income when evaluating loan applications to determine your repayment capacity alongside your CIBIL score.
Can a high credit limit improve my CIBIL score?
Yes, a higher credit limit can potentially improve your CIBIL point calculation by reducing your credit utilisation ratio, provided you don't increase your spending. Lower utilisation ratios positively impact your score. However, requesting multiple limit increases in a short period could trigger hard inquiries, which might temporarily lower your score.
Disclaimer: This article is intended solely for informational purposes. The views expressed in this article are personal. Axis Bank and/or the author shall not be liable for any direct or indirect loss or liability incurred by the reader arising from reliance on the content herein. Readers are advised to consult a qualified financial advisor before making any financial decisions. Axis Bank does not endorse or guarantee the accuracy of any third-party content or links included in this article.
Table of Contents
Related Services
Learning Hub
Look through our knowledge section for helpful blogs and articles.
Copyright@ 2025 Axis Bank