How is Your CIBIL Score Calculated?

MUMBAI: The procurement of financial products like loans or credit cards involves applicants portraying some criteria to be eligible for approval of these products sanctioned by banks and finance companies. A key criterion for eligibility is that you possess a good deal of creditworthiness. This means you must be financially sound so that banks and financial companies are convinced that you will be able to repay loans and settle credit card repayments. Your creditworthiness is determined by a credit score/CIBIL score.

What is a CIBIL Score?

CIBIL or the Credit Information Bureau of India Limited is an agency, authorized by the Reserve Bank of India, to rate and evaluate an individual’s financial standing. Most bank websites that offer loans and credit cards have a CIBIL score calculator so that you can generate your score electronically, by simply entering details. Nonetheless, a CIBIL score is a score that is a numerical value between 300 and 900 ratings an individual’s financial profile. Acting as a summary of a person’s credit profile, a report can be generated through the CIBIL website too. The closer a score is to 900, the better, and you can avail of loans and credit cards easily with good perks.

What is Considered a Good Score?

One of the most important eligibility criteria deciding your chances for getting a loan or a credit card is your CIBIL/credit score. An ideal score is a high score, but banks and NBFCs accept a CIBIL score of 700. Say I apply for a loan, and my credit score is 600, it doesn’t necessarily indicate that my loan application will be rejected. However, I may get a reduced loan amount and an overall low level of advantages with the loan. An individual who has a high score gets the best incentives as far as credit cards and loans go, as a high CIBIL score is indicative of being creditworthy.

How a CIBIL score is Calculated

A CIBIL score calculator does the job of electronically calculating your CIBIL score and generating a credit report. Nonetheless, it’s important that you know how the score is computed. An individual’s financial details are fed into an algorithm with over 200 variables of which each holds distinctive weightage. This is done through an electronic means with the following factors under consideration:

• History of Payment – This is the variable that has the most impact on your CIBIL score, amounting to 30%.
• Amount of Credit Exposure – Credit exposure constitutes how much debt has been taken in an individual’s past, and this amounts to 25% of your CIBIL score.
• Type and Duration of Credit – 25% or less of this is taken into account while calculating your CIBIL score.
• Other Factors Involved – This includes the remainder of the percentage of your credit score, and factors that may contribute to the accumulation of potential future debt.

Final Words on CIBIL Scores

If I wish to calculate my CIBIL score, I would do so by visiting the CIBIL website and entering my financial details. Financial details such as previous loan defaults, credit card outstanding balances, etc, can have adverse effects on your score. You must make sure that you maintain a good credit score to ensure you are entitled to the best financial products,  should you need them.

source https://nrinews24x7.com/how-is-your-cibil-score-calculated/

March 04, 2022