Know How Credit Score Is Calculated

Credit score is one of the most vital parameters that lenders gauge to determine a potential borrower’s creditworthiness. Despite this fact, not every individual or a prospective borrower is aware of this factor’s implications. A survey report reveals the following – 

  • About 52% of the respondents are aware of the importance of the CIBIL score. 


  • 68% of respondents do not know their CIBIL score. 

Since this score plays a crucial role in the loan approval process, individuals need to know how to check the same, alongside the factors that affect it. 

How to calculate the CIBIL score?

The Credit Information Bureau India Limit is an Indian credit rating agency that uses a suitable algorithm, primarily based on the repayment pattern and credit behaviour of an entity or an organisation, to determine the credit score.

Depending on the result, they assign a credit score ranging from 300 to 900. The higher the score, the better are the chances of availing of a loan or credit card. This score is prepared based on the data and information collected from the credit report department. 

This report effectively indicates an individual’s current financial standing and status. Moreover, lenders consider this score to gauge one’s repayment capacity and the risk of lending to a particular individual. 

Any score closer to 900 is considered ideal. For instance, the  CIBIL score for personal loans should be around 750 and above. It helps in improving eligibility by assuring a lender about on-time repayment. 

Factors that affect the CIBIL score

Following are some of the crucial factors that help in determining the credit score of an individual. 

  • Repayment history

It is one of the most vital factors that determine the credit score of an individual. Generally, this credit rating organisation collects the data on bill payment and repayment of loans via equated monthly instalments (EMI). Financial experts assert that a single late or non-payment of EMI can pull down the score by 100 or more. 

Hence, irrespective of the credit one chooses, including a personal loan, individuals need to ascertain its timely repayment. 

  • Credit Utilisation Ratio

This ratio denotes the available credit limit of a card. CUR increases when you use the card frequently. It is advised to keep a CUR of 30 or lower to keep the credit score intact. Lenders can regard you as credit hungry if your CUR exceeds 30, and they may refuse to sanction an advance. Hence, you need to compare personal loan vs credit card which one should you get to keep the quantum of external funding minimal.

  • Numbers of active accounts 

Besides knowing how to check CIBIL score, individuals also need to consider the number of existing accounts they have. They can maintain a good mixture of secured and unsecured credits to improve the personal credit score. 

  • Age of credit lines

The duration or age of a credit product has a moderate impact on credit score. For instance, when you service a loan over a longer period, it shows how effectively you have managed that particular credit. 

Financial institutions like Bajaj Finserv offers a personal loan of up to Rs.25 lakh, repayable within a tenor of up to 60 months. You can choose to repay the loan over a substantial period with a lower EMI component. 

This NBFC also extends pre-approved offers that make loan processing straightforward and hassle-free. Besides personal loans, such offers are also available on various financial products like business loans, credit cards, and many more. You can check your pre-approved offer simply by entering your name and contact number. 

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  • Credit inquiry made  

Whenever you apply for a new credit, your credit score tends to reduce. Before sanctioning a credit, lenders check the credit profile of applicants, and it leads to a decrease in this score marginally. Moreover, you should also need to read the credit report correctly to check for any discrepancy that may influence this score. 

Lastly, individuals can also consider a personal loan for debt consolidation to get rid of outstanding dues faster and improve the CIBIL score. For this, as well, they need to know how to calculate credit score first. 

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