CIBIL Score: Calculation and How to Improve Your Score

When considering a loan or credit card, one of the first things financial institutions look at is your credit score. The CIBIL score, a three-digit number issued by the Credit Information Bureau (India) Limited, plays a crucial role in determining your creditworthiness. Regulated by the RBI, CIBIL is one of the leading credit bureaus in India, alongside Experian, Equifax, and Highmark, all licensed to track and maintain your credit history. In this blog, we’ll explore how your CIBIL score is calculated and provide tips on how you can improve it to secure better financial opportunities.

What is CIBIL Score?

CIBIL Score refers to a three digit number ranging between 300-900 that summarizes your credit history, rating and report. The closer your score is to 900, the better it is for your credit ratings.

Usually, a score above 750 is considered a good score and brings in the possibility of loan sanctioning without any credit ranking problems. Multiple factors determine the range of your CIBIL score and it’s advisable to maintain habits that lead to a good score such as repaying timely etc. 

CIBIL Score Ranges

Keeping a good CIBIL score is important to get your personal loans approved. If your CIBIL score is less than 685, it may be a struggle to attain loans from financial institutions as they may reject your application and doubt the credit worthiness. Thus, it is essential to maintain a score of 685. 

This table indicates the ratings a financial institution usually considers while lending a loan and if you fall in any range rather than “750-900” it may be difficult to get a loan sanctioned under your name. 

How is CIBIL Score Calculated?

Your CIBIL score is calculated based on your credit history, which includes details about your borrowing and repayment behaviour. Here are the key factors that influence your score:

1. Payment History (35%): This is the most significant factor. It reflects whether you’ve made your loan and credit card payments on time. Late payments or defaults can negatively impact your score.
2. Credit Utilization (30%): This shows how much of your available credit you are using. Using a high percentage of your credit limit may lower your score, as it indicates potential over-reliance on credit.
3. Length of Credit History (15%): A longer credit history shows that you’ve been managing credit for a substantial amount of time. A shorter history may result in a lower score, as there’s less data to assess your creditworthiness.
4. Types of Credit Used (10%): A mix of credit types, such as loans (home, personal, auto) and credit cards, is seen as a sign of responsible credit management. Relying solely on one type, such as only credit cards, can affect your score.
5. Recent Credit Inquiries (10%): Each time you apply for credit, an inquiry is made, which can cause a temporary dip in your score. Multiple recent inquiries might indicate you are seeking credit too frequently, which can be seen as risky behaviour.

How to Check Credit Score for Free on Paytm?

Your credit score is crucial when making financial decisions, and with the Paytm app, you can easily check your score for free. Here’s how:

Step 1: Log in to the Paytm app and navigate to  ‘Loans and Credit Cards’ on the app’s home screen

Step 2: Click on ‘Free Credit Score’ option to get started.

Step 3: Follow the prompts to request your free credit score summary.

Step 4: In less than a minute, your credit score will appear on the screen for you to review.

How Can I Check My CIBIL Score Online?

Before applying for any loan or financial product, it’s always a good idea to check your CIBIL score. Here’s a simple, step-by-step process to check your credit score online.

Step 1: Visit the Official CIBIL Website

Step 2: Select “Get Free CIBIL Score and Report”  option to begin the process.

Step 3: Fill in Your Personal Information such as your name, email address, ID type, and pincode. Once entered, click on “Accept and Continue”.

Step 4: Verify Your Identity via OTP. Enter the OTP and click “Continue”.

Step 5:  After successful verification, you will be redirected to a page confirming that you are enrolled. Click on “Go to Dashboard” to proceed.

Step 6: Your CIBIL score and credit report will be displayed on your dashboard. You can download the report for reference, but as per CIBIL guidelines, you can check your CIBIL report for free only once a year.

How Can I Improve My CIBIL Score?

Improving your CIBIL score can significantly enhance your chances of getting approved for loans and credit cards at favorable terms. Here are some practical tips to help you boost your CIBIL score:

1. Pay Your Bills on Time

Your payment history accounts for a significant portion of your CIBIL score. Timely payment of credit card bills, loan EMIs, and utility bills will positively impact your score. Set reminders or automate payments to avoid delays.

2. Maintain a Low Credit Utilization Ratio

Try to keep your credit card utilization below 30%. High credit utilization can signal financial distress and negatively impact your score. Pay off your credit card balances before the due date to reduce your utilization ratio.

3. Review Your Credit Report Regularly

Check your credit report for errors and inconsistencies. Dispute any inaccuracies with the credit bureau as these could be dragging down your score. You’re entitled to a free credit report once a year.

4. Avoid Multiple Loan or Credit Card Applications

Each time you apply for a loan or credit card, the lender checks your credit score, which creates a hard inquiry. Multiple inquiries within a short period can hurt your score. Apply for credit only when necessary.

5. Maintain a Healthy Credit Mix

Having a diverse credit mix — such as a combination of secured and unsecured loans — can help improve your score. Avoid relying solely on credit cards or personal loans. A good mix shows that you can handle different types of credit responsibly.

6. Pay Off Outstanding Debts

If you have overdue loans or credit card balances, focus on clearing them as soon as possible. Settling long-standing debts will have a positive impact on your credit score.

7. Avoid Closing Old Credit Accounts

Closing old, unused credit accounts can shorten your credit history and negatively impact your score. Keep them open, even if you’re not using them regularly, to maintain a longer credit history.

8. Consolidate Debt

If you’re struggling with multiple debts, consider consolidating them into one loan at a lower interest rate. This can reduce your debt burden and make it easier to pay off, helping improve your credit score over time.

If you ever plan to take a loan down the road, make sure you have maintained a good credit score in the past years. It takes very simple steps to maintain an acceptable credit score but in times of crisis, these easy steps can lead to a big financial help.