Understanding how your CIBIL score is calculated is essential for managing your credit health in India. CIBIL scores, also known as credit scores, play a critical role in determining your creditworthiness when applying for loans or credit cards. Here's a breakdown of how CIBIL scores are calculated:

  1. Credit Information: CIBIL gathers credit-related information from various financial institutions and lenders, such as banks, credit card companies, and NBFCs (Non-Banking Financial Companies). This information includes your credit history, the types of credit you have, and your repayment behavior.

  2. Payment History (35% weightage):

    • The most significant factor in your CIBIL score calculation is your payment history. It accounts for 35% of your score.
    • It reflects how consistently you've paid your credit card bills and loan EMIs on time.
    • Late payments, defaults, or missed payments can significantly impact your score negatively.

  3. Amounts Owed (30% weightage):

    • The amount you owe to lenders makes up 30% of your CIBIL score.
    • It considers your credit card balances, outstanding loan amounts, and credit utilization.
    • High credit card balances relative to your credit limit can lower your score.

  4. Credit History Length (15% weightage):

    • The length of your credit history accounts for 15% of your score.
    • A longer credit history can positively impact your score, demonstrating your credit management over time.

  5. Credit Mix (10% weightage):

    • CIBIL considers the mix of credit types you have, such as credit cards, loans (personal, home, car), and retail finance.
    • A diverse credit mix can have a positive influence on your score.

  6. Recent Credit Inquiries (10% weightage):

    • Every time you apply for a new credit card or loan, a hard inquiry is made on your credit report.
    • Multiple inquiries in a short period can indicate financial distress and may negatively affect your score.

  7. No Credit or New Credit (Not directly weighted):

    • Having no credit history can make it challenging to establish a credit score.
    • Opening new credit accounts should be done cautiously, as too many new accounts in a short time can lower your score.

To maintain a healthy CIBIL score:

  • Pay your bills and EMIs on time.
  • Keep your credit card balances low.
  • Maintain a good mix of credit types.
  • Avoid making too many credit inquiries within a short time.
  • Regularly review your credit report for inaccuracies and disputes, if necessary.

Remember that your CIBIL score can change over time based on your financial behavior. It's advisable to monitor your score regularly and make responsible credit decisions to ensure a positive credit profile, which can lead to better loan terms and financial opportunities.