How CIBIL Score Is Calculated?

While each credit information company has its own proprietary algorithm to calculate an individual’s credit score, the most important elements of the score composition are centric around the loan payment behavior of the individual. Your CIBIL TransUnion Score is calculated based on the information in the “Accounts” and “Enquiry” section of your CIBIL Report. The score is calculated based on the following factors – an overview:

Credit Utilization: How much credit is the consumer using?

Defaulting/Delinquency: How many accounts are past due and by how many days?

Trade Attributes: How old are this consumer’s lines of credit? What type of credit does he have? Does the consumer have a good mix or balance of credit or is it all credit cards?

CIBIL score is calculated based on the following factors:

The applicant’s repayment history:

The repayment history accounts to 35 percent of the score. Therefore you need to clear all your bills and loans well within the due date to maintain a good repayment history. If you default even once, it will negatively impact your score.

The credit balance:

The amount you owe to the lender accounts to 30 percent of the CIBIL score. There are two considerations with regard to this, the first being the total credit limit that is being sanctioned to you and the second being how much of the credit have you utilized. The credit utilization ratio is calculated as the balance that is outstanding on your credit cards and loans. If you have made most use of the credit, then your profile will be considered as ‘risky’.

Credit mix:

This accounts to another 10 percent of the CIBIL score. If you are avoiding credit like a plague and just opted for a single type of credit, it is not helping you have a good credit score. You need to have a mix of secured and unsecured loans. This means you must have a mix of the different types of credit that is mortgage, personal loan, car loan, credit card etc. Having the right mix will increase your credit score rather than having just one type of credit.

Here is a breakup of the various factors that impact the CIBIL Transunion Score:

1. Past Performance: Individuals past performance on their debt obligations is the most important criterion and contributes approximately 30 per cent weightage to the score
2. Credit Type & Duration: Type of loan availed whether secured or unsecured loan, and the duration of credit history established contributes an additional 25 per cent to the score.
3. Credit Exposure: The total amount of credit exposure contributes another 25 per cent
4. Other factors: Other factors such as credit utilization, recent credit behavior contribute the remaining 20 per cent to the score.

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