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Written by
Kriti Arora
Insurance Writer
Kriti is a content marketing and branding expert with more than 13 years of rich experience across BFSI and Telecom industries. She is currently leading Digital Creative Strategy for Axis Max Life Insurance.
Reviewed by
Vaibhav Kumar
Insurance Expert
With over 15 years in life insurance, Vaibhav is a recognized products and digital leader for driving innovation at Axis Max Life. He's played a pivotal role in developing new business lines and implementing successful D2C strategies.
The CIBIL Score is a three-digit numerical representation of your credit history. The credit history in an individual’s credit report such as outstanding debt, credit utilisation ratio, repayment history, etc. is used to calculate the CIBIL score. A credit payment history across different types of loans and credit card debt over time is referred to as a Credit Information Report (CIR). Details of savings, investments, and fixed deposits are not part of your CIR, so do not impact your CIBIL score.
Credit cards and loans are used by people today to help them realize their objectives and financial goals. One of the most significant factors and measures in obtaining this much-needed credit is the CIBIL Score.
The full form of CIBIL is Credit Information Bureau (India) Limited, which is an accredited credit agency by the Reserve Bank of India (RBI) that calculates an individual's credit score. CIBIL or CIBIL TransUnion is India’s oldest credit bureau and helps prospective lenders determine an individual’s creditworthiness by compiling the CIBIL credit report and uses the data to calculate the CIBIL score. Lending institutions periodically report the status of outstanding loans and credit cards of borrowers which are used by CIBIL to generate the credit report and CIBIL score of individuals in India. CIBIL Score is currently one of the key factors that determine whether a prospective borrower’s loan or credit card application will be approved or rejected.
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Almost no loan or credit card application is granted these days without a review of the applicant's CIBIL report and CIBIL credit Score. If you have ever wondered what is a CIBIL score and how it is determined, here’s your answer.
The CIBIL credit score is calculated using information from the CIBIL Report's 'Accounts' and 'Enquiries' sections, which includes (but is not limited to) loan accounts or credit cards, payment statuses, outstanding amounts, and days past due.
A person's past conduct is used to predict his or her future actions, and the CIBIL Score demonstrates a consumer's credit worthiness. When a person applies for a credit card or a loan, for example, one of the crucial variables that lenders consider is the person's credit profile, as represented by the CIBIL Score.
While each credit information company including CIBIL TransUnion has its own proprietary algorithm for calculating an individual's credit score, the loan repayment habit i.e. timely payment of past loan EMIs and credit card dues is a key factor in this calculation.
Checking your CIBIL score doesn’t demand any monetary investment; you can check it for free. Here’s how:
An individual’s CIBIL score can range between 300 and 900, with the highest score being 900. Individuals having a CIBIL score of 750 or higher are generally regarded as responsible borrowers. The various CIBIL score ranges are shown below:
· NA/NH: Your CIBIL score will be NA/NH if you have no credit history, which indicates it is either "not applicable" or "no history." You will have no credit history if you have never used a credit card or taken out a loan or if you have been approved for a credit card/loan within the past 3 to 6 months. If your CIBIL score is designated as NA/NH, you should consider building creditworthiness because it can help you get access to credit cards and loans in the future.
. 350–549: A CIBIL score in this range is deemed poor. It signifies you haven't paid your credit card payments or loan EMIs on time. With a CIBIL score in this range, getting a loan will be tough.
· 550 – 649: In this range, a CIBIL score is deemed fair. However, because this is still not the best CIBIL score range, only a few lenders will consider giving you credit. It implies that you have been having difficulty paying your bills on time. The loan's interest rates may potentially be higher. You must take deliberate steps to raise your CIBIL score even higher in order to qualify for better loan terms.
· 650 – 749: If your credit score is in the 650-749 range, it is considered as good. This shows that you have managed your past credit card debt and outstanding loans judiciously for the most part. Prospective lenders will thus consider you to be a relatively low risk borrower. This means you will be able to get approval for new loans and credit cards with relative ease. However, do take a closer look at the factors that are causing your credit score to be lower than the ideal CIBIL score of 750 and higher. If you are able to identify and solve for such factors, your CIBIL credit score can easily increase with a relatively short time.
· 750 – 900: Having your credit score is in the 750-900 range is ideal. This shows that you have managed your credit effectively in the past and will be considered as someone with high creditworthiness by prospective lenders. You are ideally placed to negotiate favourable terms like higher loan amount/credit card limit, lower interest rates, etc. when you apply for a new loan or credit card.
In the loan application procedure, the CIBIL score is quite important. When someone applies for a loan at a bank or financial institution, the lender looks at the applicant's CIBIL score and report first. The bank may not even examine the application if the CIBIL score is poor. If the CIBIL score is high, the lender will investigate the application and take other factors into account to evaluate whether the applicant is creditworthy.
The CIBIL score serves as a first impression for lenders. The higher the score, the more likely the loan will be reviewed and authorized.
The following elements affect the CIBIL score:
Banks and NBFCs look at an individual’s credit history i.e. how an individual has handled credit in the past as a predictor of future behaviour regarding handling of future loans and credit cards. Every time you take out a loan or take out credit, the lender is required by law to report it to CIBIL. The bank keeps track of whether or not you pay your bill on schedule. It is regarded as a favourable indicator if you make an effort to repay in advance. This demonstrates that you can be trusted to pay back what you owe. Missed payments or EMI defaults have a negative impact on your credit score.
The credit utilisation ratio is the percentage of credit an individual has used compared to the overall credit limit assigned to them. To maintain a healthy credit score, experts recommend keeping your credit utilisation below 30%. A high credit utilization limit suggests a growing debt burden over time, which might harm your credit score. Lenders are wary of debtors that use more than 50% of their available credit. For lenders, a large credit exposure signifies a higher credit risk.
One of the most popular criteria used to compute credit scores is credit mix, or the diversity of your credit accounts.
Multiple credit accounts, such as a home loan, a personal loan, and a credit card, demonstrate to lenders that you can manage multiple types of debt at once. It also aids individuals in better comprehending their financial status and willingness to repay loans.
While having a less broad credit portfolio does not necessarily mean you will have lower credit ratings, the more credit kinds you have, the better (as long as you pay on time). Credit mix makes up 10% of your credit score and can help you achieve a good score.
The lender obtains your credit information from the available bureaus when you apply for a loan or a credit card. This is referred to as a "pull" or "hard" inquiry. If you apply for too many new loans or credit cards within a short period of time, your credit score may suffer.
A high number of recent hard inquiries on your credit report will have a negative impact on your credit score. Multiple hard inquiries indicate that you are in dire need of credit, making you a high-risk borrower. When your credit limit is increased, it may signal a rise in your credit burden, and your credit score will suffer as a result.
Banks keep track of your credit history in great detail. From the first time you take out credit, potential lenders can get a full report on your credit history. A long and positive credit history boosts your credit score and makes it easier to obtain credit history.
To build a healthy credit score, you must have credit for a period of time. Your credit score is influenced by your oldest credit account. When you have a long credit history, creditors can be confident that you will manage your debt well, which boosts your credit score. Your credit score will be lowered if you close previous credit accounts. As a result, it is advisable to keep your old credit cards active with minimal transactions in order to preserve a high credit score.
As per the credit information company, a CIBIL score proximate to 900 is considered excellent. If your CIBIL score falls into this range, there is a higher probability that your loan application will get approved. However, a CIBIL score of 750 and above is also regarded as good.
As previously established, a CIBIL score determines your creditworthiness to the lender. Therefore, you would be considered a high-risk borrower if you have a poor CIBIL score. Consequently, it is possible that most lenders might not approve your loan. Therefore, it’s essential to ensure that you have a good CIBIL score. But to do that, it’s vital you realise why you have a low CIBIL credit score. Here are a few reasons:
A good credit score demonstrates that you are a responsible individual who has consistently met his or her financial responsibilities. If you have a strong credit score, lenders are more willing to lend you money because they see you as a solid investment. As a result, it's critical to have a positive credit history. The following are the most important considerations:
1. Make timely payments: Keep track of your payments. If you make a mistake and miss a payment, strive to make it up as soon as possible. Payments that are past due can have a significant negative influence on your credit score. Furthermore, paying the entire debt can save you money on interest.
2. Keep credit card balances low: Don't use up all of your credit card's allotted credit. Your credit score may suffer as a result of excessive use. As a result, maintaining your balance low can help you improve your score.
3. Keep unused credit cards open: Even if you don't use a credit card very often, you should keep it open because the longer your credit history is, the better.
4. Responsibly manage several credit cards: It's fine to have many credit cards as long as you make all of your payments on time.
There are several misconceptions about the CIBIL score. One such misconception is that frequently checking your CIBIL report can affect your score for the worse. However, to brush that misconception aside, checking your CIBIL score is a healthy practice you must do at least once a year. These personal enquiries will be regarded as soft enquiries in the credit score jargon.
It is to be noted that credit enquiries do impact your CIBIL score. However, they are hard enquiries (not soft ones) made by lenders that negatively impact them. A lender will make these hard enquiries when you have filed multiple loan applications or are applying for new credit cards.
Therefore, your CIBIL score will not get adversely impacted if you are checking your own CIBIL score. But it will get adversely impacted if prospective lenders make the same enquiries, in response to new loan or credit card applications.
It’s a common practice for lenders to check your CIBIL score before they approve your loans. This is done for the following reasons:
These eligibility requirements include the minimum credit score to become eligible to secure loans from lenders. For most lenders, it is 700-750 or above.
This includes how often you have secured loans and how often you have paid your loans on time. In addition, a good credit experience highlights that you have managed your credit well in the past and lived a healthy financial lifestyle.
Lenders check your debt obligations to establish your credit behaviour and check if you can conveniently manage additional payments (of loans).
New hard CIBIL enquiries affect your credit score for the worse. For example, a lender might check the number of enquiries to ascertain if you are a credit-hungry individual. Most lenders consider credit-hungry individuals as high-risk individuals who might default on payments.
Some lenders reward existing or new individuals with special offers and benefits if they consider them low-risk borrowers. This categorisation of borrowers can be established through the CIBIL score.
To help you understand what is a CIBIL report and what is a CIBIL score, we have mentioned the differences between them in the form of a table.
| Criterion | CIBIL SCORE | CIBIL REPORT |
|---|---|---|
| Meaning | A CIBIL score is a numerical expression derived from credit data processing. | CIBIL report is a comprehensive document containing all credit data including CIBIL score. |
| Tenure | A CIBIL Score is based on 24 months of your credit behaviour. | A CIBIL Report includes 36 months of your credit history. |
| Category/Types | There is only one CIBIL score which is a three-digit numeric summary of your CIBIL report. | Two types of credit reports exist : Credit Information Report for individuals and CCR (Company Credit Report) for businesses. |
The various sections of a CIBIL credit report provide precise information about your credit history and score. The following are the elements of a CIBIL report:
Your three-digit CIBIL score is based on your credit behaviour as stated in your CIBIL report's 'Accounts' and 'Enquiries' sections.
Your name, gender, date of birth, and identity numbers such as your PAN, passport number, and voter's number are all found in this area.
Your address and phone number are included in this box.
This section offers information about the members' monthly or annual earnings, as reported by the banks and financial institutions.
This section contains information about your credit facilities, such as the name of the lending institution, the type of credit facilities (personal, home, overdraft, etc.), account numbers, the date the account was opened, the date the last payment was made, the loan amount, ownership information, the current balance, and a month-by-month payment history.
When you apply for a loan or a credit card, your CIBIL credit record will be accessed by the financial institution. The prospective lender's name, type of credit application (credit card or loan), amount of credit applied, and date of application are all given in the report.
A three-digit score ranging from 300 to 900 is assigned based on loan repayment and credit card payment history over the previous three years. The CIBIL score is a three-digit figure, and the higher the score, the better your chances of securing a loan at a lower interest rate.
When you need to check over your financial history in detail, your credit report provides a thorough account of all your payments and credit lines. It does not, however, always show your credit score. Credit reports are usually several pages long and contain information organized by categories.
Credit ratings are typically assigned to firms for loans obtained from banks, non-bank financial companies (NBFCs), institutions, or institutional investors in the form of loans or other forms of debt.
The ability of a borrower to repay both the principal and interest is determined by their credit rating. The business's historical loan and interest payback history are used to determine a good credit rating.
Credit ratings are usually expressed in symbols, and both individual and institutional investors can use them to evaluate how risky an investment is. The highest credit rating, AAA or A1, signifies a high level of safety in terms of principal and interest repayment. D is the lowest possible grade.
The most well-known credit reporting organization that banks and financial institutions rely on is CIBIL. Once you've registered and logged in to your account, you'll be able to see your credit score and report from CIBIL.
Here’s how you can register on the website:
ARN NO: PCP/CSC/050623
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(Source: Individual Death Claim Paid Ratio as per Audited Financials for FY 2024-2025)
(Source: As reported to IRDAI, FY 2024-25)
In force (individual) (Source: Axis Max Life Public Disclosure, FY 2024-25)
(Source: Axis Max Life Public Disclosure, FY 2024-25)
Individual
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