CIBIL Score

Last Updated 21st Apr 2018

CIBIL Score Range

Credit Bureaus Score Range
CIBIL Credit Score 300-900
Experian Credit Score 300-999
Equifax Credit Score 300-850
Highmark Credit Score 300-900
  • Credit Score in India is a three digit number ranging from 300 to 900, which signifies the creditworthiness of an individual based on his credit profile and past repayment track record.
  • All four credit scoring agencies in India; CIBIL, Experian, Equifax and Highmark use their proprietary calculations and algorithms to estimate your credit score.
  • Banks check your credit score before taking a decision to sanction you a loan. Hence, a Good Credit Score is one the most important factor that can help you get the best loan at cheapest rates.

What is a Good Credit Score?

A Good Credit Score is defined as a score at or above which you should be able to get a loan easily at the lowest interest rates, subject to your eligibility and other documents check. Typically, banks in India consider a credit score of 700 and above as a Good Credit Score. Further, banks may ask for a higher credit score for unsecured loans as compared to secured loans such as home loans.

Good Credit Score in India

Loan Type Good Credit Score
Home Loan Above 650
Personal Loan Above 700
Loan against Property Above 650
Business Loan Above 700
Car Loan Above 700
Gold Loan Not required

How to improve CIBIL score?

Your CIBIL Score is based on your credit behavior and past credit repayment track record. Banks submit your loan details to CIBIL on a regular basis, which over-time gets documented in your credit report and is used to calculate your Credit Score. Some of the important factors that are used in your CIBIL Score calculation along with tips to maintain a good credit score has been included in the table below:

Factors that impact your Credit Score

Parameters Weightage (Approx) Factors that impact your score Tips to improve your credit score
Past repayment track-record 30% Timely loan payments, loan defaults, over-dues and loan settled
  • Make timely payments on all loan dues
  • Never leave any loan unsettled even if there has been a default or delay in payments
Portfolio mix 25% % share of secured and unsecured loans
  • Restrict the proportion of unsecured loans in total loans portfolio to less than 30%
  • Avoid holding more than 2-3 credit cards
Credit utilisation 25% Credit limit utilization, number of loans
  • Restrict your credit card over-dues to up to 50% of your credit card limit
  • Avoid taking multiple loans over a short period of time
Other factors 20% Number of loans, number of applications,
  • Do not apply for multiple loans in a short span of time
  • If you do not have other loans, spend actively on your credit card to build credit history

In summary, practicing credit discipline by keeping your borrowing levels manageable and ensuring timely payments of your EMIs and other dues are the key to maintain a healthy score.

Factors that do not impact your CIBIL Score

Many times, we get worried that a chance delay in any of our obligatory payments such as tax or utility bill payments may get reported as a CIBIL default and impact our Credit Score adversely. However, many of these events are not reported to Credit Bureaus and hence, do not impact your CIBIL Score. Few factors that do not impact your Credit Score are:

  • Payment track record of utility bill payments including mobile and electricity
  • Prepayment of loans or transferring your loan to another bank
  • Payment track record of rent payments
  • Cheque Bounces in your bank account
  • Your Spouse’s CIBIL Score
  • Checking your CIBIL Score regularly
  • Any delay or defaults in tax payments
  • Delay or default in paying to your suppliers or trade partners

While you may breathe easy that the above events are not going to affect your adversely, one word of caution : many of these factors may still be evaluated by the bank while taking a decision to lend. So, indirectly they may impact your eligibility to get a loan. Our advice is to follow a healthy and disciplined practice towards paying all your dues in time as:

  • Many banks and NBFCs check your bank statements for cheque bounce information or your utility bills payment track-record to evaluate your credit-worthiness. This is especially true in the case of unsecured business loans or SME loans.
  • Similarly the banks may also check your spouse’s CIBIL score to establish the credit worthiness and calculate the eligibility of the household as a unit or in cases where you have filed a joint a loan application or are business partners.
  • In recent past, there have been increasing consensus on including utility bill payments records as a part of credit score calculations. This is a popular practice in many developed countries and there is a likelihood of it getting implemented in India as well.

Why do I have a poor CIBIL Score?

It is extremely important to consider any early warning signs and take corrective actions to improve your credit score. Typically, poor credit score reflects the past credit repayment track record of the borrower. But sometimes, it may be a result of reporting errors by banks.

Below is a list of parameters that can adversely impact your CIBIL score:

Low CIBIL score due to wrong reporting by banks

Though CIBIL Score is ought to reflect the credit behavior of a borrower, sometimes wrong reporting by banks may translate into a low CIBIL Score. Some of the common errors by banks that can impact your credit score are:

  • Wrong credit info provided by banks
  • Record not updated even after the customer has paid
  • Lenders classifying a/c as “settled with loss” while actually the dues were disputed
  • Lenders showing amount as “overdue” even when the demand is contested by the customer
Low CIBIL credit score due to past behavior of borrower

Credit behavior and repayment track record of the borrower are some of the factors that result in a low CIBIL score. Some of the common credit behavior factors that result in a low credit score of borrowers are:

  • Write offs reported, particularly in last 2-3 years on secured loans, unsecured loans and credit cards
  • Outstanding credit card dues
  • Delay in payment of EMI’s on home loan, loan against property, personal loan, consumer loan, gold loan or any other loan
  • Too many loans already availed
  • High credit availed on credit cards
  • Too many loan applications made in the recent past
  • Higher proportion of unsecured loans in total loans outstanding

Understanding Credit Score Details

If you download your free credit report, you will notice that the report evaluates the following factors for calculating your credit score.

Credit Parameter How it impacts your credit score
Past Payment Track Record
  • Repayment track record of all your past debts
  • Consistent track record of meeting payments on time drives a higher score
  • Delayed payments lead to a lower score
  • More recent the delays, more the negative impact
Past Defaults, Settlements, Write-offs
  • Write-offs recorded by lenders on past debts pull down your credit score
  • Recent write-offs are viewed more negatively than the older ones
  • Multiple write offs lead to a significantly lower credit score
  • Defaults or delays in repaying secured loans (e.g. home loans) are viewed more negatively than those on unsecured ones (e.g. credit cards)
Secured Loans Vs. Credit Cards and Unsecured Loans
  • Greater reliance on unsecured loans (credit cards, personal loans) as opposed to secured loans is viewed negatively
  • Fewer of such accounts with regular payment history support a higher credit score
  • High balances (as proportion of total limit) on credit cards drive down credit score
Loans as Proportion of Income
  • High loan balances (as proportion of income) tend to pull down score
  • Low balances indicate healthy credit usage habit and lead to a higher score
Loan Enquiries
  • Too many loan enquiries made for availing loans in the recent past reflect a “credit hungry” behavior and affect the score negatively

Comparison of CIBIL, Experian, Equifax and TransUnion Credit Reports

EQUIFAX CIBIL EXPERIAN HIGH MARK
Years in India Received license in 2010 Established in 2000 Received license in 2010 Received license in 2010
Credit score range 300-850 300-900 300-999 300-900
Free Credit Report Annual credit report (without credit score) Annual credit report (without credit score) Annual credit report (without credit score) NA
Paid Credit Score Rs 400 for credit score Rs 550 for one-time Credit Score Credit score and report can be bought online for Rs. 399 Rs 399 for Credit Report with Score

Our News - Apr 2018
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