CIBIL score calculation depends on your past credit behaviour and creditworthiness. The four major Credit Bureaus or Credit Information Companies (CICs) of India calculate and generate the credit scores of individuals by using their own and different statistical algorithm. Likewise, TransUnion CIBIL also calculates and manages the CIBIL score by their unique algorithm. There is no specific mathematical formula to calculate credit score and it varies from bureau to bureau. Credit score, also commonly known as CIBIL score is calculated on the basis of your credit history and is considered as the most important component of your credit report.
Factors on which CIBIL Score Calculation Depends
A good credit score doesn’t imply that your loan application will be accepted automatically. The lender will also consider a number of factors before disbursing the loan to you. Let us have a look at some of the most important factors on which CIBIL score calculation depends:
Credit score is calculated based on your credit history. It has the highest weightage of 30% in your CIBIL score calculation. The banks and the financial institutions send personal as well as credit related information to the credit bureaus. The credit bureau then collates all the information into your credit report and calculate credit score. The credit bureau has a month-on-month record of the latest 3 years of your payments towards your bills and EMIs.
The credit report will also have the status for each account whether it has been settled, written off and the total outstanding amount. It also carries about your days past dues details that is the details of the payments you have made. So, if you have ever defaulted or have delayed paying your equated monthly installment (EMI) on any of your loan or made late payment on your credit card, it will affect your credit score negatively.
Suggested Read: How Credit Card Impacts your Credit Score?
Credit Utilization Ratio (CUR)
The amount you spend to the credit limit available to you on a credit card is considered the credit utilisation ratio. It has a weightage of 30% in calculating your credit score. For calculating your credit utilization, take the ratio of credit amount utilised to your credit limit.
Keeping a high credit utilization or maxing out your card frequently is seen negatively by the credit bureaus. It shows that the person’s credit burden is rising over time and gives a negative impression to the credit bureau.