How Credit Bureaus Calculate CIBIL Score: Important Factors Explained

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A CIBIL score is a three-digit number ranging from 300 to 900 that reflects an individual’s creditworthiness based on past borrowing and repayment behaviour. Banks and financial institutions use this score to assess loan approvals, credit card eligibility, interest rates, and credit limits. Understanding how credit bureaus calculate CIBIL score is important before applying for credit, as even small mistakes can lead to rejections or unfavourable terms.

What Is a CIBIL Score

A CIBIL score is a number made up of three digits that tells the story of an individual’s credit history and is created by TransUnion CIBIL based on the details in the Accounts and Enquiries sections of the CIBIL report. The score is determinedbased on the customer’s loans and credit cards, their payment habits, outstanding balances, and the number of days they are late, as these are all reported by the lenders.

The score is from 300 to 900, determining the person’s creditworthiness in general and reliability in payments. The higher the score, the better the chances of getting a loan or credit card, and it is true that about 79% of loans in India go to people with a score above 750, so it becomes a very important factor in lending decisions.

https://www.cibil.com/blog/all-you-need-to-know-about-cibil-score

How Is the CIBIL Score Calculated?

To understand how credit bureaus calculate CIBIL scores, it is important to note that there is no fixed or publicly disclosed formula. CIBIL does not reveal an exact CIBIL score calculation formula.

Instead, scores are calculated using multiple weighted factors derived from an individual’s credit report.
Credit bureaus look at one’s credit behaviour over time and present it as a prediction of the likelihood of the person being able to repay the loan in the future.

What this means is that all the credit actions, whether paying an EMI on time, using a credit card, missing a due date, or applying for a new loan, are all considered in the score calculation.

Key Factors That Decide Your CIBIL Score

The following factors carry the highest weight in CIBIL score calculation and directly influence loan and credit card approvals.

Repayment History (Most Important Factor – ~35%)

Repayment history shows whether EMIs and credit card bills are paid on time.

  • Timely payments strengthen the CIBIL score
  • Late payments, defaults, or settlements reduce the score
  • Even a single missed payment can negatively affect approvals

Credit Card Utilisation Ratio (~30%)

Credit utilisation measures how much of the available credit limit is used.

  • Using more than 30% of the total limit indicates a higher risk
  • Lower utilisation reflects disciplined credit behaviour
  • High utilisation over time can lower the score even if payments are timely

Credit Mix and Credit Duration (~25%)

Credit mix refers to the combination of secured and unsecured credit, while credit duration reflects how long credit accounts have been active.

  • A balanced mix of home loans, personal loans, and credit cards improves score strength
  • Older credit accounts increase score stability
  • Closing old accounts can reduce credit age and lower the score

Also, read: Impact of Credit Card Cancellations on Your Credit Score

Other Factors That Affect CIBIL Score

Apart from the main elements used to calculate the CIBIL score, several other factors can also affect the score and the overall creditworthiness. These factors are not always the most crucial ones, but their total effect can change the outcome of loan and credit card approval significantly.

  • Lenders can take note of several loan or credit card enquiries made within a short period as indicating credit hunger. Every hard enquiry results in a slight decrease in the score, and frequent applications might suggest financial difficulties or being overly reliant on credit
  • The presence of too many unsecured loans, such as personal loans or several credit cards, leads to a higher perception of lending risk. As there is no collateral in unsecured credit, the borrower’s excessive exposure can hurt the score.
  • Errors in the credit report, such as incorrect payment status, outdated account information, or duplicate loan entries, can unjustly lower the score if not immediately corrected.
  • Being part of a joint loan or guarantor default situation can affect one’s score, even if personal repayments are always on time. When a co-borrower or guaranteed party defaults, the liability impacts all associated credit profiles.
  • Reactivation of dormant credit accounts may come as a sudden event, thus raising concerns over risk, especially if large transactions or high utilization follow the period of inactivity.

Tips to Improve Your CIBIL Score

A consistent credit discipline and monitoring your credit behavior regularly are some of the significant practices to elevate your low CIBIL score. Since the score mirrors long-term repayment patterns and borrowing habits, the shift only takes place over time, but with strong financial responsibility

  • Create a strong repayment history by making all EMIs and credit card bills timely. The highest impact on your CIBIL score comes from timely payments, while delays or missed dues can greatly drop it
  • Always keep your credit usage within 30% of your total credit limit. Lower credit usage shows that you are in control of your credit, and, therefore, lending risk is reduced.

Multiple loan or credit card inquiries in a short time should be avoided, as frequent hard inquiries might indicate financial difficulties and thus lower your score.

Also, read: How to Improve Your CIBIL Score Immediately

Conclusion

Borrowers need to understand the credit bureaus’ methods in calculating the CIBIL score to make informed borrowing decisions and to avoid the pitfalls of bad credit. Due to the fact that the score reflects repayment history, credit utilization, credit mix, and overall credit behavior, it becomes necessary to observe financial discipline. The CIBIL score that is monitored regularly, paid on time, and credited responsibly can, in a steady manner, gain a higher list of loan and credit card approvals with good conditions.

FAQs

  1. What are the factors determining the CIBIL score?

Repayment history, credit utilization ratio, credit mix, length of credit history, and recent credit inquiries are the main factors that contribute to the calculation of the CIBIL score. All these reasons combined give a good picture of the credit behavior and repayment reliability.

  1. What is the method of calculating CIBIL rank?

CIBIL rank is purely a business-oriented concept and it mainly depends upon the credit exposure, repayment patterns and overall borrowing behavior of the enterprise as the company’s staff rather than the individuals.

  1. Does it mean a reduction in my CIBIL score if I check it?

Not at all. Checking your own CIBIL score is considered a soft enquiry, and the score will not be impacted negatively in any way.

  1. How long does it take for a low CIBIL score to become normal?

With regular payments made on time and limited use of credit, usually the score can be seen to improve in about three to six months.

  1. Can inaccuracies in my credit report bring down my CIBIL score?

Definitely. The incorrect or outdated information in the credit report can score you lower, and it should be rectified at the earliest.

  1. When is the CIBIL score most frequently updated?

The score is updated whenever the lenders report new repayment or account data, usually every 30 to 45 days.

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