Credit Score
Loan & CreditCIBIL Credit Score
A three-digit number (300–900) that represents your creditworthiness based on your repayment history, credit utilisation, loan mix, and credit enquiries. A score above 750 is considered good in India.
Definition
A credit score (commonly called a CIBIL score in India, after TransUnion CIBIL — the country's largest credit bureau) is a three-digit number between 300 and 900 that represents your creditworthiness. Lenders use it to assess the risk of lending to you.
A higher score indicates responsible credit behaviour — paying EMIs on time, maintaining low credit utilisation, and having a long credit history. A lower score indicates missed payments, high debt, or a thin credit history.
India has four credit bureaus: TransUnion CIBIL, Experian, Equifax, and CRIF Highmark. All lenders report to all four, and your score may differ slightly between bureaus depending on their scoring models.
Formula
Credit scores use proprietary models and have no public formula. However, the five factors and their approximate weights in CIBIL's scoring model:
| Factor | Weight |
|---|---|
| Payment History (on-time EMIs and bill payments) | ~35% |
| Credit Utilisation (outstanding balance / credit limit) | ~30% |
| Length of Credit History | ~15% |
| Credit Mix (secured + unsecured + revolving credit) | ~10% |
| New Credit Enquiries | ~10% |
Worked Example
Arun has a salary of ₹60,000/month. His credit profile:
- Home loan EMI of ₹22,000/month — never missed a payment in 4 years
- Credit card limit: ₹1,00,000 — typically uses ₹20,000 (20% utilisation)
- Personal loan closed in 2022 — no defaults
Arun's CIBIL score: approximately 790
He applies for a car loan. The bank checks his CIBIL score, sees 790, and approves the loan at 8.5% interest rate.
His colleague, with a similar income but 3 missed credit card payments and 60% credit card utilisation, has a score of 680 and is offered the same loan at 12% — paying nearly ₹50,000 more in total interest on a ₹5 lakh loan over 5 years.
Key Things to Know
- Credit utilisation below 30%: If your credit card limit is ₹1 lakh, aim to keep your monthly outstanding below ₹30,000. High utilisation signals credit dependency and lowers your score. Request a limit increase to automatically improve your utilisation ratio without spending more.
- Never close your oldest credit account: The age of your oldest credit relationship significantly influences your score. Closing an old credit card or loan account (even if paid off) can reduce your average credit age and lower your score.
- LTV and credit score: A higher credit score often allows you to negotiate a higher LTV (and therefore a lower down payment) on home loans. Lenders view 800+ borrowers as lower risk.
- EMI-to-income ratio (FOIR): Lenders also look at your Fixed Obligation to Income Ratio (FOIR) — total monthly loan obligations divided by income. Even with a great credit score, most banks will not lend if FOIR exceeds 50–55%, as your existing EMIs already consume too much income.
- Check your report annually: Get a free credit report from all four bureaus once a year (CIBIL, Experian, Equifax, CRIF). Errors in your report (incorrect defaults, duplicated accounts) can suppress your score unfairly — dispute them immediately through the bureau's online portal.