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What is CIBIL and how can I improve my CIBIL score?

Now a days no loans get approved without checking your credit or (CIBIL) score. CIBIL is the short form of Credit information bureau of India Limited, it is one of the bureau score (there are other agencies like Equifax, Experian working in India).


Purpose of Credit score-


The Purpose of credit score is to check probability of default. It's a leading indicator of person's financial behavior. Credit score is considered as major underwriting tools by banks and financial institutions to lend money. All the credit bureau check financial behavior using multiple factors. e.g.


  • Somebody is having 3 car loan and 4 credit card. Certainly he or she may be rich but it also shows that person is having high risk apatite.

  • If a person has applied for 10 loan in last two month or say someone had taken 5 loan in last month and now he is applying again for new loan it shows his urgent need of money which is a worrying fact for the bureau

This way bureau try to understand persons credit worthiness and financial behavior and overall indebtedness.

CIBIL -

  1. CIBIL is the leading bureau agency that gather loans data and track your bank loan history and repayment track record.

  2. All the banks and financial institutes shares the repayment record and other relevant data with all such agencies on monthly basis.

  3. Records, not just include repayment but even small loan inquiry, Number of loan taken, number of loan rejected, previous default (if any), total loan outstanding etc.

  4. Based on all such data bureau (or CIBIL ) derive one score.

  5. This score shows probability of default.

  6. Score ranges from 300 to 900.

  7. Lower the score higher the chances of default for bank and vice-versa

  8. Normally score of 750 Plus is considered as excellent one. Anything below 700 is considered as poor in banking world. Score from 650 and below is normally indicate a previous default.

What are the factor that affect your credit score ( in order high to low)-


(Please note above % are tentative and may differ from actual)


  1. Past performance or Repayment of existing loan and previous loan and previous defaults.

  2. Loan type and vintage- Proportion of loan viz. secured (Home loan etc ) and unsecured ( personal loan, credit card etc) drive your credit score .

  3. Loan Vintage or duration of loan is also an important factor. Older the loan history higher the score.

  4. Overall credit exposure- Higher the number of loan lower the score.

  5. Limit utilization- Credit card outstanding as a % of total limit. e.g. if your credit card limit is 1 lacs and continuous utilization is above 70% or say 70000 it will affect your score negatively. While lower utilization will improve your score

  6. Recent loan inquiry ( if you have applied to bank for loan and later denied from taking it. It will also hurt your cibil score.

  7. Recent loan rejections if any.

  8. Recent loan taken etc.

In western counties like USA they even considered utility bill payment etc. for deriving credit score.


What is CIBIL score of Minus one (Score of -1) -

  1. It means NIL or Insufficient credit history.

  2. First credit score is derived, once you have 6 month of credit history

  3. CIBIL usually considers past 24 months of credit history ( of active loan)

Can you Improve your CIBIL score ? Certainly Yes, Now the question is how ?


Here is the answer-

  1. Try to take small personal loan and pay off all the EMI on time, this is the best way of improving score. If unable to take loan than -

  2. Do small fixed deposit and take credit card against the same, use it for routine purpose (small utilization) and pay off all the bill on time. If this is also not possible than

  3. Take small consumer loan may be from Bajaj finance for buying mobile or other white goods and pay off all the EMI on time. Even if not able to take consumer loan then you can do small FD with say with Bajaj and take consumer loan.

  4. If there is a previous default pay off the loan and take NOC remember try not to settle but pay off in full

Please note personal loan, consumer loan improve and worsen credit score very fast.


Can you correct your CIBIL score ?


Many a time due to wrong reporting or mis-selling of product like credit card or because of bank's mistake you credit score got affected, You can not simply approach credit bureau and get it corrected. In such scenario you need to ask banks and financial institution to update to such credit bureau for correction. Once bank made such request credit bureau agency (Like CIBIL etc) update their record and your score get updated.


Normally a CIBIL score of person having a home loan, 1-2 credit cards and an auto loan with clear repayment track record ranges from 770 to 850


You can reach out at gourav@equialpha.com for any queries

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