CIBIL Score

Last Updated 15th Aug 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 CIBIL 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

Why is a good CIBIL score important?

Credit score is like a finger print. It clearly gives a picture of a person's financial health and how responsibly he uses his money. Most people are not even aware of the credit scoring process, until they apply for a loan! And then it dawns on to the small steps that could have been taken in everyday life to have a good credit score. But that might be too late as the person’s loan application would have already been rejected and he would be left on to a loan path to rebuilding or improving his credit score.

Here are some of the ways in which your credit score can affect your finances as well:

  • Credit Score influences the ability to avail loan:

With a low credit score, your loan application may be rejected. The lender might consider you high-risk and thus not willing to lend. The banks and big finance companies are choosier as they offer low rate of interest on the loan. The financial implications of not being able to get a loan at reasonable rates to meet your home buying, personal or business requirements is well understood.

  • Good Credit Score can help you save your money:

Smaller NBFCs and finance companies have more relaxed loan eligibility parameters. However, they charge a higher rate of interest to compensate for the higher risk they take on certain customer profiles. So, even if you get loan, you might have to pay a higher rate of interest for the same amount borrowed.

All banks, NBFCs and finance companies will pull out your credit report to get a clear picture of your credit history. The credit score is an indication of your credit worthiness and thus reliability and will also determine the rate of interest you will end up paying on your loan.

  • Good Credit Score gets you better deals:

High credit scores would entail you from availing benefits like:

  • Higher end credit cards with better reward points
  • Cash back offers
  • Discounts like surcharge waiver for fuel
  • Better flight reward points
  • Airport lounge entry card
  • Some freebies, etc.

These benefits would not be extended to someone with a low credit score. People will higher credit score get regular offers from banks and credit card companies to upgrade to high value credit cards with multiple rewards and benefits.

  • Credit Score can impact your career:

There are some employers who check the credit scores of their potential employees before extending the job offer. This trend is fast increasing even in India. Just like social media platforms, even credit scores will soon become important for employment, especially true for the new joinees. The credit history acts as a reference check. The employers would use it to get a better picture of their maturity, discipline and trustworthiness.

Bearing these points in mind can surely help you to achieve the required credit goal. A good credit score not only improves your chance to get easy approval of your credit card or loan, it also helps you get lowest interest rates, higher tenure or best loan eligibility!

So, a good step taken towards a healthy credit score is beneficial in more ways than one.

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
Past repayment track-record 30% Timely loan payments, loan defaults, over-dues and loan settled
Portfolio mix 25% % share of secured and unsecured loans
Credit utilisation 25% Credit limit utilization, number of loans
Other factors 20% Number of loans, number of applications,

Top 7 Tips to improve your Credit Score:

  • Keep your Credit Report free of errors:

There are cases when you have been a good borrower and have repaid your loans on time. However, due to system errors, your score is lower than what it should be.

For example, Rishi had paid off his loan in full and had closed down the loan account as well. But due to some administrative error, the account was still showing active in his credit report. He approached the credit bureau and bank and informed them of the wrong reporting. By making corrections, he could improve his credit score.

Tip : Check your Credit Score on a regular basis, especially after closing a loan or a card.

  • Do not miss or delay your payment:

The repayment schedule of an individual is an important factor for calculating credit score. The track record of the payment made towards credit card and loan makes up to one-third of the credit score. Thus, any kind of late payment will adversely affect your credit score.

Tip : If you start paying off your bills on time, you can immediately see a positive impact on your credit score.

  • Do not revolve your credit card balance:

Being a balance payer of credit card has a great impact on your score. It means, whenever a credit card bill is due, make the full payment instead of the minimum amount. This definitely improves your credibility to the lender.

Tip : Make small purchases on your credit card and pay them on time.

  • Limit the utilisation of your credit limit:

The easiest way to improve your credit score is to avoid utilisation of your full credit card limit. The trick is to limit the utilisation of your monthly credit card limit to 50% of the total.

For example, if you have a credit limit of Rs. 1 lakh a month then you should ideally not exceed the monthly spent beyond Rs. 50,000.

Utilisation of your credit limit more than 50% generally signifies that you might have financial issues. This signifies that you may not be in a position to keep aside some amount to pay off your debt on time. Hence this leads to a drop in the score.

Tip : Get a credit card of a higher limit and then spend only 50% of the limit to improve your credit score.

  • Do not go for credit card or loan settlement:

Credit card or loan settlement happens when you are unable to pay your EMI on time. The borrower then offers to close the entire debt for a mutually agreeable amount. This settlement amount is usually much lower than the total amount that needs to be repaid. However, once your credit card is "settled" for a lesser amount, you would get a very bad spot on your credit score.

Tip : Never opt for settlement of card or loan. Instead, make delayed payments if necessary, but close it completely so as to avoid this bad spot!

  • Avoiding multiple credit card or loan application in a short period of time:

If you are make multiple enquiries or applications for loan in a short period of time, then it is not a positive signal. Lenders may get edgy about your credit profile, feel that you are cash crunched and may be hesitant to lend to you if other banks have rejected your loan application recently.

Tip : Space out your application of loans so that the lender is not scared off!

  • Opt for secured loans or credit cards:

Even if you have a low credit score, you could easily avail a secured loan like a Gold Loan. Or avail a secured credit card which is issued against a collateral. In this case, your CIBIL score would not be required to avail the loan as it is against a collateral. However, disciplined usage and timely repayment of a gold loan or a secured credit card would surely help your score to increase.

Tip : Ensure you repay your secured loan or gold loan on time to improve your score on CIBIL.

Usually, it takes about 4 to 12 months to improve your credit score, if you take the right steps. So, all that is needed from someone with a low credit score is commitment, patience and self-discipline.

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
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