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How is Your CIBIL Score Calculated?

Published on Sept 11, 2020Updated on Jul 17, 2024

How is Your CIBIL Score Calculated?

Your CIBIL score plays a key role when you make a loan request to any financial institution. Statistics suggest that 90% of loan applications are approved for those applicants with a CIBIL score of 750 or above. Having a higher CIBIL rating increases the chances of your loan application getting sanctioned.

Of course, every credit rating agency has its own way of calculating the credit score of an individual using different parameters. Undoubtedly, prior to making your loan application, you must have a clear understanding of how to calculate your CIBIL score to minimize the chances of it getting rejected. 

Take a look at how to calculate your CIBIL score. 

CIBIL Score Calculation

The CIBIL Score is a number that financial institutions depend on to determine an applicant’s creditworthiness for any kind of a loan, advance, or credit card application. It is a number between 300 to 900.

The authorized body that undertakes the job of the CIBIL Score calculation is known as TransUnion CIBIL Limited. It generates a summary in the form of a Credit Information Report. It contains all relevant information about the applicant’s credit payment history across loans, credit cards, and overdraft facilities over a designated period.

Must Read: What is a Good CIBIL Score to Get a Loan?

How is CIBIL Score Calculated?

The credit bureau takes into account a number of factors in order to complete your credit score calculation and generate the report. These parameters include:

Credit History:

Your past repayment history on loans and credit cards is given the highest priority in your CIBIL report. The credit bureau collates all the information that is sent by banks and financial institutions such as bill payments, EMI compliance, and other credit-related details every month.

Your credit report will list all of these accounts and their individual statuses under the headers settled, written off, or left outstanding. If there are any past dues, for example, a delayed or missed EMI payment, or a credit card payment, the report will also mention the same. Any negative activity adversely impacts your credit score.

Credit Utilisation:

Credit utilization refers to the credit amount that has been used against your total credit limit. Experts recommend restricting your credit utilization to approximately 30% of your limit. A downward usage trend of your credit utilization helps boost your credit rating. 

Therefore, if you have credit cards, make sure that you pay well over the minimum payment due and limit your spending. Do remember that it is always best to pay off your credit card bills in full to the extent possible. This is because even if you pay the minimum amount due, you will be charged interest for the remaining amount, which will rack up your overall utilization and consequently affect your CIBIL score. Try and use your debit card more or opt for cash transactions instead. 

Credit Mix and Duration:

When the bureau does your CIBIL Score calculation it also checks on the type of credit that you depend on the most. Your report will highlight you as a risky borrower if you have taken more unsecured credit such as personal loans and credit cards. On the other hand, secured loans like home and car loans help to enhance your rating, especially if you have made regular, timely repayments.

Another key factor under this parameter is the time period taken to service your credit. Loans that have been repaid on a longer schedule can boost your credit rating significantly as opposed to short-term ones.

Must Read: How to Get a Personal Loan with a Low CIBIL Score?

The Number of Hard Inquiries:

In addition to these three core factors, your credit score calculation also depends on the number of times you have made a credit application. Every attempt of securing credit drives lending institutions to run checks on your CIBIL report in order to understand your credit behavior.

Too many of these hard inquiries impact your CIBIL rating. Therefore, it is best to make an application for credit with an institution where you are quite certain of it getting approved.

Final Thoughts

If you have been trying to secure a loan and have a credit rating of 750 and above, we invite you to apply online today. Alternatively, you are also welcome to meet us at your nearest SMFG India Credit branch.

* Please note that this article is for your knowledge only. Loans are disbursed at the sole discretion of SMFG India Credit. Final approval, loan terms, disbursal process, foreclosure charges and foreclosure process will be subject to SMFG India Credit's policy at the time of loan application. If you wish to know more about our products and services, please contact us

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