Why CIBIL Scores Ranging from 300 to 900 Measured

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Why Is a CIBIL Score Measured Between 300 and 900?_WC

4 min 07 May 2024

Highlights:

What Makes Your Credit Score Change Between 300 and 900

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:  

Credit Score	Rating
800 – 900	Excellent
750 – 800	Very Good
625– 750	Fair
625 and below	Low

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

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.

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