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How is Your CIBIL Score Calculated?

CIBIL score is the numeric expression of an individual’s credit behaviour, evaluated and assigned by TransUnion CIBIL. This score holds immense importance in terms of attaining approval for loans, credit cards, or any other advance. An individual’s credit score ranges from 300 to 900, and it is determined after assessing several aspects related to his/her credit behaviour. Therefore, it is vital to know the CIBIL score calculation process to increase awareness about this metric.

How is CIBIL Score Calculated? 

The credit rating company TransUnion CIBIL calculates credit score based on the ‘Accounts’ and ‘Enquiry’ section of a CIBIL report. To know how credit score is calculated in India, check the key points below.

  • Past Performance

The borrower’s past performance in handling debt obligations gets the highest weightage of 30% in preparing the CIBIL score.

  • Credit Exposure

The borrower’s total credit exposure constitutes a 25% weightage in preparing the CIBIL report.

  • Credit Type and Duration

The type of credit, such as secured and unsecured, and the duration of the credit, contribute 25% to CIBIL score calculation.

  • Other Factors

Factors such as credit utilisation ratio and credit inquiry comprise the remaining 20% weightage to CIBIL score formula.

These four factors play a key role in how CIBIL score is calculated in India.

How Much CIBIL Score is Required for Home Loan Approval?

CIBIL score requirements vary depending on the type of credit chosen. For instance, a credit score of 750 and above is generally deemed fit to attain home loan approval. Nonetheless, a number anywhere around 700 is still favourable for home loan sanction from Bajaj Housing Finance.

Make sure you calculate CIBIL score online or check it from TransUnion CIBIL’s website or any reputed lender’s portal for free to ascertain that the score is at the desired level. Know how to check CIBIL score.

What is the Ideal CIBIL Score You Should Have? 

Conventionally, a CIBIL above 750 is considered ideal for approval for any credit. However, for unsecured credits such as personal loans, a higher score may be required to compensate for the absence of collateral. On the other hand, for secured credit such as home loans, a CIBIL score of 750+ guarantees prompt loan approval if other eligibility criteria are in place.

Anyone struggling to reach the desired home loan CIBIL score can refer to CIBIL score calculation formula and take note of a few tips to improve scoring accordingly. Below are some of the tips to consider.

  • Clear existing debts and pay credit card bills and EMI on time
  • Keep credit utilisation ratio below 40%
  • Maintain a healthy mix of secured and unsecured credits
  • Limit credit inquiry to a minimum
  • Mention all income sources
  • Try to keep FOIR below 50% 

These factors improve CIBIL score as well as loan eligibility. With a high CIBIL score, individuals can enjoy competitive interest rates and better loan terms. Therefore, CIBIL score calculation gives an insight into a borrower’s credit profile and consequently his/her credit eligibility. It also helps borrowers improve CIBIL score after knowing the factors that affect this score.