A CIBIL score is an indicator of your creditworthiness which is displayed in a numerical format. It ranges from 300-900 and usually a score above 750 is considered good/high rating. And a higher CIBIL score will get you good deals on interest rates for loans or while applying for a credit card. Majority of the lenders such as banks and Non-Banking Finance Companies (NBFCs) often sanction loans or credit cards to people who have a CIBIL score of above 750. Therefore, a low CIBIL score reduces your chances of getting a personal loan or any other credit. So, you have to use your loan and credit card carefully to maintain a high CIBIL Score. Moreover, your CIBIL score is made up of various components and each of these having a different weightage.
Who Calculates Your CIBIL Score?
CIBIL scores are calculated and generated by TransUnion CIBIL credit bureau after taking into consideration different factors including payment history, credit type, the age of the credit, and other factors.
Five(5) Components that calculates your CIBIL Score
- Re Payment history – 35%
- Credit Exposure – 30%
- Length / duration of credit history – 15%
- Type of loan ( Housing , Pl ) – 10%
- Credit Inquiries – 10%
Mistakes that harm your CIBIL Score
- Missing out on Payment ( cheque bounce )
- Maintaining Your Credit Utilisation Ratio High
- Availing Loans more than Required ( leverage ratio)
- Making Multiple Credit Inquiries ( applying at multiple lenders )
- Having a Low Credit History and repayment track record
- Not Checking Your CIBIL Report
- Not Closing pending payments of old loans
How to Increase or Maintain a Healthy CIBIL Score
- Repay Credit Dues on Time
- Limit Credit Utilization and have mix of Secured and Unsecured Credit
- Applying New Credit Cards with Loan Eligibility
- Keep a Check on your Credit Report
- Increase your Credit Limit by good use of Credit Card
- Keep an eye on Old outstanding in Credit Report
Note: Good & Fair utilisation of credit mix and repayment of loans on time are the key factors for a healthy CIBIL Score.