Why is a CIBIL Score Measured Between 300 and 900?

What is the CIBIL Score Range?

Whether you are planning to avail of a Home Loan or already have one, you should be familiar with the concept of CIBIL score. An individual's CIBIL score is a three-digit number ranging between 300 and 900 that denotes their creditworthiness and repayment capacity.  

In India, four credit information bureaus are authorised to collate credit information about borrowers. These are Experian, Equifax, TransUnion CIBIL and CRIF High Mark. Of these, TransUnion CIBIL is the most well-recognised credit information bureau and is preferred by lenders. TransUnion assigns a CIBIL score ranging between 300 to 900 to an individual based on their creditworthiness and repayment capacity. 

The following table displays the CIBIL score range and the corresponding rating:   

Note: The CIBIL Score Range is defined as per the industry standards.  

What is a Credit Score?

A credit score is a three-digit number that shows your creditworthiness. The CIBIL score, which is assigned by TransUnion CIBIL, is the most widely recognised credit score in India. This number can be anywhere from 300 to 900. A higher score means a better credit history and better loan management. Before approving your loan, lenders and banks assess this score to determine the loan terms.   

How is a CIBIL Score Calculated? 

CIBIL assigns a score based on the information provided by financial institutions. Here are a few key factors that have a big impact on your score: 

• Payment History: This is the most important thing: your payment history. Paying your EMIs and credit card bills on time every month can help your score, but missing payments or making late EMI payments can harm it.  
• Credit Utilisation: This tells you how much of your available credit you are using. A lower utilisation ratio means better credit management and a higher score. 
• Credit Type and Length: A good mix of secured and unsecured credit, as well as a longer credit history, is helpful. 
• Number of Credit Enquiries: Applying for new credit frequently in a short period of time (hard enquiries) can reduce your score. 

Benefits of a Strong CIBIL Score 

Having a high CIBIL score, usually closer to the top of the 300–900 range, has the following benefits:

• A high score can increase your chances of being approved for a loan 
• With a good credit score, you can secure a lower interest rate 

How to Check Your CIBIL Score? 

You can check your CIBIL score for free by following these steps:

1. Go to the CIBIL check form.  
2. Fill in your name, mobile number, date of birth, PIN code, PAN, and email address. 
3. Click ‘Generate OTP’ and type in the one-time password.  
4. Your CIBIL score will be displayed on the screen.  
5. You can also click ‘Download Now’ to download your full credit report.  

Checking your score often keeps you up to date on your credit health and lets you improve it, id required. 

What Makes Your Credit Score Change Between 300 and 900? 

When borrowers apply for a Home Loan, the first thing that a lender checks is their credit score. Credit Information Bureaus collect information about borrowers from lending institutions and based on this information, they calculate an individual's credit score. Let us look at the various factors that affect a borrower’s credit score and how credit scores are calculated.  

Past Repayment Behaviour

This is one of the key factors that affect your credit score. Credit Information Bureaus collect information from institutions regarding how regular you have been in your EMI and bill payments. Based on this information, they assign you a credit score. A single missed EMI payment can decrease your credit score by a few points. So, make sure to clear all your EMIs and bills on time.  

People Also Read: How to Calculate Home Loan EMIs 

Hard Enquiries Registered Under Your Name 

When a borrower checks their credit rating, it is known as a soft enquiry. Soft enquiries do not affect an individual's credit score. However, when an individual applies for credit and the lending institutions request to check the borrower's credit rating, the request is registered as a hard enquiry. Too many hard enquiries show an individual to be credit hungry and this affects their credit rating negatively. One must, therefore, apply for credit only when necessary.  

Number of Credit Accounts

The number of credit accounts you have affects your CIBIL rating because they allow the credit information bureau to analyse the ratio of secured to unsecured loans in your account. The more varied your credit portfolio, the better will be your credit rating. Further, the tenure of your credit account allows credit analysts and experts to gauge how long you have had access to credit and how well have you managed it in the past.  

Credit Utilisation Ratio

Credit ratio utilisation ratio is the ratio of the credit being used to credit available. For instance, if your credit card has a limit of Rs.1 Lakh and you are using Rs.40,000 each month, your credit utilisation ratio would be 40%. Ideally, borrowers should try to maintain a low credit utilisation ratio. 

An individual's credit score is one of the key factors that affects how easily they will get approved for a loan and what will be the terms and conditions of the loan. If you are planning to apply for a loan, check your credit score first and apply once your credit rating is good. 

Read Also: Tips to Check Your CIBIL Score for Free