If you’re planning to take a loan or apply for a credit card, the very first thing banks and financial institutions check is your CIBIL score. This three-digit number (ranging between 300 and 900) reflects your creditworthiness. A high score increases the chances of loan approval, while a low score can lead to rejection or higher interest rates.
But CIBIL is not just a number—it represents your payment history, credit habits, and repayment track record. By adopting the right financial practices, you can improve your score and make access to credit easier. Let’s understand how CIBIL works, how it’s calculated, and what factors affect it.
What is a CIBIL Score?
CIBIL score is essentially a number that comes from your credit report. It shows whether you have repaid loans and credit card bills on time or not.
-
High Score → A signal to banks that you are trustworthy and repay on time.
-
Low Score → Increases the risk of rejection and may lead to higher interest rates.
How is CIBIL Score Calculated?
CIBIL is a three-digit score (300–900), derived from your financial behavior and repayment history. Banks and financial institutions share your data with credit bureaus, which then calculate the score using an algorithm.
The score is not based on a single factor, but on multiple elements, each carrying different weightage:
1. Payment History – 35%
-
Positive: Paying EMIs and credit card bills in full and on time.
-
Negative: Delays, outstanding dues, or defaults.
2. Credit Utilization – 30%
Shows how much of your total credit limit you use.
-
Example: If your credit card limit is ₹1 lakh and you spend ₹30,000, utilization is 30%.
-
Positive: Keep ratio below 30%.
-
Negative: Consistently maxing out your limit hurts your score.
3. Length of Credit History – 15%
Reflects how long you’ve been using credit.
-
Positive: Longer history improves the score.
-
Negative: Avoid closing old credit cards or loan accounts, even if unused.
4. Credit Mix & New Inquiries – 20%
-
Credit Mix: A balanced combination of secured loans (like home loans) and unsecured loans (like credit cards) boosts the score.
-
New Inquiries: Applying for too many loans or cards leads to “hard inquiries,” lowering the score.
Easy Tips to Improve Your CIBIL Score
-
Always pay EMIs and bills on time.
-
Use credit wisely and avoid over-utilization.
-
Keep old accounts open for a longer credit history.
-
Don’t apply for too many loans at once.
-
Maintain a healthy mix of secured and unsecured loans.
👉 A score of 750+ is generally considered good, showing financial responsibility and trustworthiness. Remember, CIBIL is not just a number—it’s a reflection of your financial health.
FAQs
1. What is a CIBIL Score?
It’s a three-digit number (300–900) that shows your ability to repay loans and credit cards on time.
2. Why is CIBIL Score Important?
Banks and financial institutions check it before approving loans or credit cards. A high score means easier approval and better loan terms.
3. How is CIBIL Score Calculated?
It’s based on credit history, repayment behavior, loan/credit card usage, and credit inquiries.
4. How Can I Improve My Score?
Pay EMIs and bills on time, avoid excess credit use, repay old loans, and check your credit report regularly.
5. What if My Score is Low?
Pay dues on time, reduce credit utilization, and maintain a clean repayment history to gradually improve it.