How Credit Bureaus Calculate CIBIL Score: Factors You Need to Know

To calculate the CIBIL score, TransUnion CIBIL assesses many factors that have a direct impact on credit health. This score is also a reflection of your ability to handle the borrowed amount and repay it on time. As such, financial institutions give it a lot of importance and weightage when assessing your applications.

Knowing how your credit score is calculated is one way to understand what’s best for your eligibility. After learning this, you can take proper steps to improve your score and get affordable credit. This way, you can stay prepared when you need urgent financial assistance. 

How is the CIBIL Score Calculated

Here are the four key factors that TransUnion CIBIL relies on to calculate the CIBIL Score.

Repayment History

Issuers and lenders report your credit behaviour to the bureaus every 30 to 45 days. During that period, if you have paid your credit card bill or loan EMIs on time, it positively impacts your score. Ideally, this factor makes up for 35% of the score.

However, any repayment delinquencies or delays can significantly lower your score. Reports reveal that your CIBIL score can go down by up to 100 points with just one missed EMI or unpaid credit card bill. 

Also Read:  How to Make Credit Card Bill Payments

Credit Utilisation Ratio 

This ratio refers to the amount of your existing debt or used credit limit. Ideally, having a ratio under 30% makes you eligible for the majority of loans. In case the ratio exceeds this mark, you may have difficulty getting approval for the loan. 

This is because it shows that you depend highly on the borrowed amount to manage your finances, which makes you a risky applicant. Hence, your credit utilisation ratio holds 30% weightage when they calculate the CIBIL score. 

Also Read: How to read a CIBIL Report?

Credit Mix and Duration

These factors make up 25% of your credit score, as your experience in handling credit is important. Having a mixed bag of credit on your report ensures issuers and lenders that you can manage your credits effortlessly. 

So, you must apply for secured as well as unsecured types of credit to boost your score. In addition to that, a long credit history adds to your eligibility. For this, it is important that you do not close your previous credit accounts with positive repayment behaviour and a negative history of defaults. 

Other Factors

Any other activity related to your credit behaviour falls under this section. This includes a number of hard enquiries and a number of rejections. Making too frequent applications for credit cards and loans makes you seem credit-hungry. 

Furthermore, having many rejections on your record can leave a wrong impression on the credit bureau. As such, all these factors combine to make 10% of your CIBIL score. 

Tips to Improve Your CIBIL Score

Here are some practical actions to take that can help you maintain and improve credit score. 

• Use your credit card responsibly and keep your borrowed amount under 30% of your utilisation ratio 
• Use reminders and alerts to pay your credit card bill on time
• Avoid borrowing more than you can afford to repay 
• If your finances allow it, avoid settling the credit card bill with minimum due payment
• As TransUnion CIBIL calculates the CIBIL score every 45 days, make sure to check your report timely
• Check the eligibility criteria on the issuer’s or lender’s website before applying to avoid rejection 
• Keep your credit card account open for a lengthy credit history 

With these tips, you can boost your eligibility with the right steps and patience. Thereafter, you can apply for any loan or credit card you want and enjoy hassle-free approval. If in case you need funds urgently, you can opt for the Fibe Online Personal Loan. 

With Fibe, enjoy up to ₹5 lakhs personal loan without any end-use restrictions. You don’t even need to have a high credit score, as we rely on alternate scoring mechanisms. This way, you don’t have to wait till you have a 750+ credit score and get a loan anytime for your planned and unplanned requirements. 

With a flexible tenure option and comfortable interest rate, the repayment plan is convenient. Other features that make it an ideal option are minimum documents, no lengthy paperwork, and quick disbursals. Download our Personal Loan App or visit our website to apply now!

FAQs on CIBIL Score

What is the CIBIL score based on?

To calculate the CIBIL score, credit bureaus give weightage to the following factors.  

• 35% of your payment history 
• 30% of your credit utilisation ratio 
• 10% of the types of credit that you have applied for
• 15% on the duration
• 10% on other factors 

How is the CIBIL rank calculated?

When generating a credit report for a company, TransUnion CIBIL considers the repayment behaviour of the company and utilised credit to calculate CIBIL rank. Measured on a scale of 1 to 10, here, a score of 1 makes you highly eligible for a company loan.