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How is Your CIBIL Score Calculated – A Step-by-Step Guide

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How is Your CIBIL Score Calculated – A Step-by-Step Guide

Welcome to the Cochin Financial Services blog! In this comprehensive guide, we will unravel the mystery behind one of the most critical aspects of your financial health – the CIBIL score. Understanding how your CIBIL score is calculated can empower you to take control of your financial future.

Basics of Your Credit Score

To put it simply, a credit score is a number that determines how likely you are to repay the loan you have borrowed. Speaking of how is credit score calculated in India, there are four major credit bureaus that calculate credit scores. They are TransUnion CIBIL, CRIF Highmark, Experian, and Equifax. While each of these credit bureaus has its statistical algorithms to determine individuals’ creditworthiness, they all look at your past credit history and financial behaviour which they compile into a report for the lenders.

A Brief Guide to CIBIL Score Calculation

The CIBIL score is the most popular marker of credit score in India. It is a three-digit number that is within the range of 300 and 900. If you have a higher CIBIL score, the lender will know that you are financially stable and you will most likely pay back the loan in time. A high CIBIL score makes you a low-risk borrower in the eyes of the lender. So, you have better chances of securing a loan, and that too at a comparatively lower rate of interest.
Below is a table that will help you understand the CIBIL score range and how it affects your creditworthiness and chance of loan approval:

CIBIL Score Creditworthiness Chances of Approval  
Under 600 Very poor Very low
600-649 Poor Low
650-699 Average Moderate
700-749 Good High
750 and above Excellent Very high

     So, let’s dive into the step-by-step process of calculating your CIBIL score and

     how it impacts your financial life.

Step 1: Data Collection:

The journey to calculating your CIBIL score begins with data collection. Credit bureaus like TransUnion CIBIL gather information from various financial institutions, including banks, credit card companies, and lenders. They compile a detailed report of your credit history, which includes your past and current loans, credit card usage, repayment behavior, outstanding debts, and any recent credit inquiries.

Step 2: Data Classification:

Once the data is collected, the credit bureau classifies the information into different categories. Positive data, such as timely loan and credit card repayments, contribute to a higher score, while negative data, like defaults or late payments, can lower your score. The key factors considered include:

a) Payment History (35%): This is the most crucial factor in your CIBIL score calculation. It assesses whether you have paid your dues on time or if you have any past defaults.

b) Credit Utilization (30%): This factor measures the percentage of credit limit you are currently using. Maintaining a lower credit utilization ratio positively impacts your score.

c) Credit Mix (25%): A diverse credit mix, including different types of loans like home loans, auto loans, and credit cards, is considered favorable as it demonstrates responsible credit management.

d) Length of Credit History (10%): A longer credit history indicates stability and responsible credit usage, which can positively affect your score.

Step 3: Credit Score Calculation:

With all the data classified, the credit bureau uses complex algorithms to calculate your CIBIL score. The score ranges from 300 to 900, where a higher score signifies lower credit risk. Generally, a score above 750 is considered good and enhances your chances of getting approved for loans and credit cards with favorable terms.

Step 4: Credit Report Generation:

After calculating your CIBIL score, the credit bureau generates a detailed credit report, which includes your personal information, credit score, and credit history. It is crucial to review your credit report periodically to ensure accuracy and identify any discrepancies.

Step 5: Lender’s Assessment:

When you apply for a loan or credit card, lenders request your credit report from credit bureaus like CIBIL. The lender uses your credit score and report, along with other eligibility criteria, to determine your creditworthiness and the terms of the credit they can offer.


Your CIBIL score is a significant determinant of your financial health and credibility in the eyes of lenders. Understanding how it is calculated empowers you to make informed financial decisions, improve your creditworthiness, and maintain a healthy credit profile. Remember to pay your bills on time, maintain a low credit utilization ratio, and manage your credit mix wisely. Regularly monitoring your credit report allows you to correct any inaccuracies promptly.

At Cochin Financial Services, we believe in the power of financial literacy. By staying informed and responsible, you can unlock a world of opportunities and financial well-being.

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