A three-digit numerical assessment of a borrower’s credit record is called a “CIBIL Score”, often referred to as a Credit Score of the respective borrower. It is calculated and maintained by CIBIL or Credit Information Bureau (India) Ltd. It refers to how successfully you have handled financial obligations in the past, such as a mortgage, bank loan, or credit card.
CIBIL Score Value
Credit Score values can vary from 300 to 900.
- Excellent Score: 750–900
- Good Score: 650–750
- Average Score: 550–650
- Poor Score: 300–500
The CIBIL Score calculation method
The credit history contained in the CIBIL Assessment is used to calculate the CIBIL Score. It considers the credit record of the applicant during the previous 36 months. An individual’s payment history comprises all of the debts they have taken out, including credit and debit cards, consumer lending, vehicle loans, bank overdrafts, and house loans, as well as their payment history.
How to raise your credit score with CIBIL?
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Financial History
One of the essential aspects that might have a good or negative impact on your Credit scores is your credit history. Your credit score will improve if you pay all outstanding charges from your credit card payments and lending EMIs on schedule. Additionally, your score will be affected if you make late or missed payments. Therefore, such financial conduct should be prevented to maintain a good score. According to a CIBIL investigation published by the Financial Express, a 30-day late payment might lower your Credit scores by 100 points.
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Financial Exposure
The credit utilisation ratio, called credit exposure, is the second-largest element affecting your CIBIL score. The credit utilisation ratio measures how much credit you have utilised about the total credit accessible to you. Experts recommend using at most 30% of your whole credit card balance. A strong credit utilisation ratio indicates that you need credit and are having financial difficulties. Lenders could deny your request due to extensive credit consumption on your credit cards since they believe you have a high chance of defaulting.
Type of Credit and Duration
Lengthy credit history is an indication that you have expertise in managing credit. The length of time since you officially launched a credit account is referred to as your credit record. Therefore, it is advisable to start developing a credit history as soon as possible since it is useful if you intend to purchase a home or a vehicle in the future, both of which require larger loans.
Your CIBIL score is calculated while also considering the sort of credit you have. Maintaining a good balance between secured (such as a mortgage or vehicle loan) and unsecured (such as credit card) loans is crucial.
Other Elements
Hard inquiries are another element that is considered while calculating your CIBIL score. Lenders obtain your CIBIL record from the credit bureau when you ask for credit, for example, a borrowing or a credit card. A complex query falls into this category, and having several of them will lower your score. It is not advisable to apply for several credit lines at once.
