Learn to calculate and improve your cibil score for easy loans


What do you think is the crucial factor that determines whether a loan will be sanctioned or not?

Yes, you got it right; it is the requisitioner’s credit score/ CIBIL score. It plays a pivotal role in determining whether a loan will be sanctioned or not.

There are three elements to a credit: Credit history, credit report, and credit score.

Credit history: Indicates the past debts undertaken, open and the repaid ones, list of credit cards held, and so on.

Credit Report: Indicates the current financial information such as account balances, etc.

This article will discuss how to increase your cibil score in detail. So let’s dive in:

What is a CIBIL score?

CIBIL score is a 3-digit score ranging from 300-900 assigned to a requisitioner based on his credit history and profile. It reflects one’s capability to repay the loan based on the past credit profile and repayment pattern. A higher CIBIL score indicates better repayment probability and vice versa.

Four agencies issue credit scores by tracking the credit history of income-earning Indians: Experian, Equifax, TransUnion CIBIL, and CRIF Highmark. TransUnion issues credit scores as CIBIL, India’s most accepted credit rating.

How to calculate CIBIL score?

Now that we’ve understood the need for a good CIBIL score, let’s know how to calculate.

The following are the four factors that determine the CIBIL score.

1) Repayment pattern:

This is the essential factor of the CIBIL score, which gives a history of the repayment schedule; due compliance with the deadlines indicates a lower risk of default, and the requisitioner is eligible for preferential interest rates. On the contrary, consistent delay in repayment suggests a higher risk of default and is subjected to a decline in loan or higher interest rates

2) Consumption of credit:

Credit consumption is the amount of loan you’ve consumed against the funds allotted. The credit utilization ratio is calculated to determine credit consumption.

Credit utilization ratio = balance funds/ total funds allocated

Maintaining a ratio below 30% is generally recommended for a good CIBIL score. The lower the ratio, the better it is for your CIBIL score

3) Credit period:

Credit period/ age indicates the duration you are handling the credit. A long credit period and timely repayment per schedule enhance your score.

It builds a sense of confidence for the lender when the requisitioner in the past was capable of handling debt for a more extended period and repaid on tim

4) Credit mix:

Credit mix is the mix of maintaining both secured and unsecured loans. You may opt for a secured personal loan and an unsecured home loan. This parameter has minimum impact on the credit score calculation; however, it is recommended to maintain a balance in your portfolio of credit.

CIBIL score ranges:

Credit Score Range Rating/ Score
300-500 Poor
550-650 Average
650-750 Good
750-900 Excellent

The best CIBIL score is between 650-900, as recommended by experts.

How to improve your CIBIL score?

Here is how to improve the CIBIL score:

1) Set reminders for payment:

Set monthly/ quarterly reminders for repayment of debt. Delay in repayment shall lead to a penalty on one side and a negative impact on your credit score as well. In case you face any issue with remembering deadlines, do make it a point to set reminders and pay within timelines

2) Maintain old credit cards

Maintain all your old credit cards to the extent you are capable of repaying the bills. This shall increase your credit period one way to improve your CIBIL score

3) Customize your credit ratio:

When considering how to increase the CIBIL score quickly, do not miss the credit utilization ratio. Try to restrict your credit usage within limits only. Reaching the limits, however, will negatively impact the credit score. If required, discuss with the lender and opt for increasing the limits based on your expenses to ensure that you are within range

4) Longer durations:

Taking loans with a longer duration has multiple benefits:

  • EMI is low; there is no need for higher cash outflows
  • You may repay earlier if money is available; you are not burdened with immediate repayment
  • It improves your credit score; if the repayment schedule has duly complied with

5) Don’t take many loans at once

Undertaking many loans at once creates an illusion of unavailability of money and may lead to subsequent failure in repayment. Therefore, it is not advised to opt for multiple loans at once; on the contrary, opt for one loan at a time, repay the same and move on to the next one. This shall create a sense of responsibility and increase your CIBIL score

6) Avoid being Guarantor

A guarantor is one who undertakes the responsibility to repay a loan in case of default by the original requisitioner. In case the guarantor undertakes payment responsibility and delays in the repayment schedule, the same shall also impact the credit score of the guaranto

7) CIBIL score report scrutiny:

Check your CIBIL score report in detail as there are instances where a couple of parameters are missed/ wrongly reported. For example, a loan repaid recently is not reflected in the report, this shall have a negative impact on the score, and rectification of the same is essential. Therefore, always spend a considerable amount of time checking your reports at regular interval

8) Credit mix:

Always maintain a solid mix of secured and unsecured loans with short and long-term duration. This shall help you access preferential interest rates while applying for loans in the future.

9) Credit card limit:

Whenever there is a call from a bank to increase your credit limit, go for it. It doesn’t mean not holding control of your expenses. The objective is to maintain lower costs against your sanctioned limit, which shall positively impact your score.

Wrapping Up:

Now that the basics of calculating your CIBIL score and how to improve your CIBIL score immediately are clear, you may opt to check your credit score on TransUnion CIBIL’s official website. In addition, many 3rd party websites are also available to calculate your score.

One crucial point is that the steps you take today to improve your credit score shall not yield immediate results. It shall take at least six months to 1 year to reflect on your score.