The online CIBIL score is determined using its own proprietary algorithm by different credit bureaus, but the key elements of the composition of the score revolve around an individual’s loan and credit card repayment actions.
A CIBIL Blog notes that the estimation of the CIBIL score takes into account four factors relating to a borrower’s credit conduct. These factors are:
- Credit History: In the CIBIL score calculation, the previous credit repayment track record or your credit history is of the utmost importance. In the formula for calculating your CIBIL score online, your previous credit track record has a weightage of about 30 percent. Both banks and NBFCs share each individual borrower’s payment track record on a regular basis with CIBIL. The credit office compiles details and uses the same data for calculating the ranking. This collected data is a month-on-month record of the last 3 years of your payments to your bills and EMIs that collect timely payments, delayed payments, sums settled and written off.
Tip: Always make payments on all credit dues on time. Even if there has been a default or delay in payments, never leave any loan unsettled.
- Credit Utilization: To measure the amount of your credit usage, your existing unpaid loan obligations divided by your usable limit will be used. As it means your rising debt burden and monthly commitments, a high and rising credit utilization ratio can have an adverse effect on your ranking. In your CIBIL score calculation, the credit utilization ratio has a weightage of 25 percent.
Tip: Restrict over-dues on your credit card to up to 50 percent of your credit card cap. For a limited period of time, stop taking several loans.
- Credit Mix: Your loan portfolio composition also has an impact on your score in terms of the proportion of secured and unsecured loans. Your credit score has a negative impact on the higher proportion of unsecured loans in your overall loan portfolio. In your score estimation, Credit Mix is calculated to have a weighting of 25 percent.
Tip: Limit the share of unsecured loans to less than 30 percent of the overall loan portfolio. Avoid carrying credit cards for longer than 2-3.
- Other Factors: The number of credit applications you have submitted in the last few months also has an impact on your CIBIL score, in addition to the three factors above. If your CIBIL report reveals numerous applications for loans that have been denied in the recent past, a lower credit score would reflect this. Banks are also hesitant to lend to borrowers that other banks have refused. In your CIBIL Score estimation, these other variables are calculated to have a weightage of up to 20 percent. Therefore, after you review your CIBIL ranking, it is extremely important to apply to select banks after thorough research and comparison of the loan schemes of all banks in India. CIBIL score check free online by PAN number will do this.
Tip: Don’t apply for a limited period of time for multiple loans. If you don’t have other loans, actively spend money on your credit card to build a credit history.