How is Credit Score or CIBIL Score Calculated

How CIBIL Score is Calculated: Credit Information Bureau India Limited is India's first Credit Information Company. It is founded in August 2000. It plays an important role in India’s financial system. It helps the loan providers to manage their business.

CIBIL collects and maintains records of an individual’s payments with respect to loans and credit cards. This information is then used to create Credit Information Reports (CIR) and credit scores which are provided to credit institutions in order to help evaluate and approve loan applications.

How is Credit Score or CIBIL Score Calculated
Before this CIBIL and credit scores existed, the banks, financial and other credit institutions had to estimate whether somebody is a good applicant for a loan or not. CIBIL score is a composite score on a scale of 300-900. It is calculated by CIBIL based upon multiple factors. 

Most important key factors which determine CIBIL Score includes Past payment Track Record, Past Defaults, Settlements, Write Offs, Secured loans Vs Credit cards and Unsecured loans, Loans as Proportion of Income, Loan Enquiries.

Important Factors to Calculate the CIBIL Score or Credit Score:

It depends on the below factors in order to calculate the CIBIL Score:

Payment Record of the Past:

It checks the Repayment track record of all the past debts of the candidates. The persons who maintain consistent track record will get the higher score. The payments which are not paid within the time will get lower score. The more number of delays lead to more negative impact on the candidates record.

Past Defaults, Write-offs:

The write-offs recorded by lenders on past debts pull down the persons credit score. The recent write-offs are viewed more negatively than the older ones. The multiple write offs lead to a significantly lower credit score. Delay in repaying the secured loans like home loans are considered more negatively than those on unsecured ones.

Loans as Proportion of Income:

The score will be very less if there are high loan balances. Low balances lead to high credit score.

Credit Score Estimate:

If the credit score is between 750 to 900, it is excellent score and the person is maintain consistent track record. If the credit score is between 700 to 750, then it is fairly good and the person’s past payment track record is good.

The persons can visit website to know their exact CIBIL score.
How is Credit Score or CIBIL Score Calculated How is Credit Score or CIBIL Score Calculated Reviewed by amara sangati for Rating: 5