29 Nov CIBIL Score Calculation – Get to Know Your Credit Rating!
Planning to apply for a loan or credit card? A quick CIBIL score calculation will help you figure out whether you are eligible for a particular product or not. These days, traditional lenders such as banks do not approve applications without checking CIBIL TransUnion Score and CIBIL report. Applicants with excellent credit scores are likely to get the approval fast, whereas, people with poor credit score may get rejected. It is crucial to understand what goes into your CIBIL report and how your score is calculated. Below is a quick explanation on Credit Score Calculation to help you get a clearer picture.
Before you do your CIBIL score calculation
Before we get into the details of credit score calculation, let’s find out what the CIBIL TransUnion score is. TransUnion CIBIL Limited, India’s leading credit information company, calculates your credit score through various advance systems and analytics. At the end of the process, the organization will assign a number between 900 and 300 depending on your credit history. This number is your credit score or CIBIL score. The higher your score is, the better is the likelihood of you getting approval on loans, credit cards, and other financial products. While 900 is considered an excellent credit score, 300 is deemed to be poor.
As mentioned above, banks always run a credit check on applicants. Having good credit score makes you appear more financially stable and capable of repaying the loan/credit card on time. That automatically improves your chances of getting the approval. On the other hand, if your credit score is close to 300, the lenders may see you as a “high-risk” applicant. That will not only lower your chances of approval, but it may make you ineligible for most financial products. Though different banks have a different credit score cut-off, most institutions prefer a minimum score of 750.
CIBIL score calculation formula
Wondering how to calculate CIBIL score for personal loan? Before applying for a personal loan or any type of credit, you should find out if the bank considers you eligible. Your CIBIL score is a huge part of your eligibility, which is why you need to know your score. While having a good score does not automatically give you the approval, it surely gets you off to a good start! Let’s find out the key factors that lenders take into account when performing a standard CIBIL score calculation.
Your credit history plays a critical role in determining your credit score. It covers 30% of the CIBIL score calculation. When you apply for a loan, the bank or lending institution sends your personal and credit information to the credit bureau. Then the credit bureau collects and combines all the data into your credit report and proceeds to calculate your score. A standard credit report has a monthly record of your financial performance for the last 3 years.
Credit duration and mix:
Your loan portfolio also has a huge impact on your credit report. If you are thinking “how to calculate cibil score for credit card,” first consider how many unsecured or secured loans you are currently servicing. Your loan portfolio or credit mix covers about 25% of the credit score calculation. Secured loans are those that require collateral, and unsecured loans are those that do not require collateral. Having multiple unsecured loans on your record may have a negative impact on your score.
Every applicant has a borrowing limit based on his/her credit score. Credit utilization shows how much of that limit you have already used up by taking up loans. Your credit utilization reflects the amount of debt you currently have and your overall financial standing. It covers 25% of your credit score calculation. To know your credit utilization, you need to divide your outstanding debt with your credit limit. Having a high credit utilization negatively affects your credit score.
There are several other factors that have a huge impact on your credit report. These elements also influence your CIBIL score calculation. Things such as the number of loan applications you have made recently, how well you are currently servicing your existing debts, whether or not you pay your bills on time can determine your credit score. The miscellaneous factors cover 20% of your credit score calculation. Having multiple credit inquiries on your credit report can be a negative sign. If you have applied for multiple loans in the recent past, it is sure to show up in your credit report. It can also damage your score.
So, now that you know the basics of CIBIL score calculation and what factors play the most crucial roles, you can keep a check on your credit habits and financial performance.