How Credit Bureaus Calculate Credit Score

There are four credit bureaus in India.  They have been licensed by RBI to operate in India today, namely

  1. CIBIL
  2. CRIF High Mark.
  3. Experian 
  4. Equifax

With CIBIL being the oldest, a credit score has become synonymous with a CIBIL score. CIBIL scores are a numeric indication of your credit health, and are assigned a value of between 300 and 900.


As a rule of thumb, the higher your score, the better your chances of being offered a loan or credit card at competitive interest rates and other terms. Essentially, it is your gateway to better credit. Let us look at some of the factors that affect the CIBIL score calculation, and how you can better your score to get loans easily. These include:


Credit mix – A healthy mix of secured (or collaterised) and unsecured (loans with no collateral such as personal loans) credit helps your CIBIL score in a positive manner. This is because it indicates good debt management to a prospective lender. When a lender is evaluating your loan application, this is the personal credit history that helps decide whether to approve the same or not, and at what terms. Of course, keep in mind that these are not the only factors that determine the decision, but they do play a critical role. Hence, with a healthy score, you can rest assured of being able to get loans easily!


Length of credit history – Simply put, this refers to the period of time that you have been servicing a card or loan account. Vintage on an account indicates to a lender that you are able to manage credit well over an extended time period.


Utilisation of credit limit – Let us assume you have a credit card with a Rs. 3.0 lakh limit. Using Rs. 90,000 or 30% is ideal, as anything above that could indicate that the consumer is unable to manage finances and relies to a great extent on debt.


Payment track record – It is not only the credit history, but also your repayment track record that is important. This is because timely payments indicate to a lender that you are a responsible borrower and can meet your obligations in time.


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