CIBIL score calculation: How is CIBIL score calculated? (2024)

By Sujata Ahlawat

Your CIBIL score is an important factor that lenders look at while evaluating a loan application. Hence it's important to understand how the score is calculated. While there is a proprietary algorithm that determines your CIBIL score, the most important elements of the score composition are based on an individual's loan payment behavior.

Let's take a look at what exactly the CIBIL score is, and how it is calculated.

What is the CIBIL score?
The CIBIL score is a 3-digit numeric summary of your credit history, derived by using details found in the 'Accounts' and 'Enquiries' sections of your CIBIL report, including (but not restricted to) your loan accounts or credit cards, and their payment status, as well as outstanding amounts' days past due. The score reflects your credit worthiness, based on your borrowing and repayment history, as shared by lenders. Your CIBIL score ranges from 300 to 900 and the higher your score, better are your chances of getting a loan approved. In fact, 79% of loans are sanctioned to consumers with a CIBIL score greater than 750.

How is the CIBIL score calculated?

There are four key factors that impact your CIBIL score:

1. Payment history: Making late payments or defaulting on your EMIs has a negative impact on your score.
2. Credit mix: Having a balanced mix between secured loans and unsecured loans is likely to have a positive impact.
3. Multiple enquiries: Too many loan enquiries may have a negative impact on your score as it indicates that your loan burden may go up in the future.
4. High credit utilisation: A high credit utilisation limit indicates a rising debt burden over time and may negatively impact your score.

How can you work towards a high CIBIL score?
Your CIBIL score is based on your credit history and past payments, but it subsequently impacts your future access to credit. What you do today can help you build a stronger and healthier credit footprint. Here are a few quick tips to help you improve your score:

• Always pay your dues on time. Late payments are viewed negatively by lenders.
• Keep your balances low. Be prudent, do not use too much credit, and control your utilisation.
• Maintain a healthy credit mix of secured (like home loan and auto loan) and unsecured loans (like personal loan and credit cards) - too many unsecured loans may be viewed negatively.
• Apply for new credit in moderation. This shows that you are not continuously seeking excessive credit.
• Monitor your co-signed, guaranteed and joint accounts monthly. Remember that you are held equally liable for missed payments in co-signed, guaranteed or jointly held accounts, and your joint holder's (or the guaranteed individual's) negligence could affect your ability to access credit when you need it.
• Review your credit history frequently throughout the year. Monitor your CIBIL Score and Report regularly to avoid unpleasant surprises (like a rejected loan application). Checking your report regularly will also alert you to possible inaccuracies, if any. In case you spot any discrepancy, you can log a dispute on the CIBIL website or request the lender to report the correction to CIBIL.

As you look to achieve your planned financial goals or in case of an emergency, you may need access to credit. Make sure you monitor your CIBIL score and credit profile regularly to ensure you are credit-ready. Start working towards improving your score today.

(The author is VP and Head of Direct-to-Consumer Interactive, TransUnion CIBIL.)

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