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Major Factors That Affect Your CIBIL Score

A CIBIL score is an important factor that helps you get access to credit products like loan and credit cards. Lenders such as banks and other financial institutions take into consideration your score and other factors including your income, age, and job stability, among others.

What is a CIBIL score?

A CIBIL score is a numerical representation of your ability to repay the credit. It is a three-digit number that falls in the range of 300-900. A score closer to 900 can get you better deals on credit cards and loans. Majority of lenders like banks and non-banking finance companies (NBFCs) prefer a CIBIL score of 750 and above.

Who Calculates your CIBIL score?

TransUnion CIBIL credit bureau calculates CIBIL scores after taking into consideration several factors including payment history, credit type, the age of the credit, and other factors.

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What are the Factors that Affect your CIBIL score?

A CIBIL score is made up of four main factors:

Payment History 30%
Credit Exposure 25%
Credit Type and Duration 25%
Other Factors 20%

Let’s take a look at some of the major factors that can affect your CIBIL score negatively:

  • Irresponsible Payment Behaviour:
  • Your payment history has the biggest influence on your score. It is important to pay your credit card bills and loan EMIs on time every month. As per a CIBIL analysis (reported by the Financial Express), a 30-day delinquency can reduce your score by 100 points. If you have multiple credit cards as well as loans, it is advised to set up reminders and alerts, to avoid missing payments or delaying them. Any missed or overdue payments reflect poorly on your score and suggest that you are not consistent with repaying credit.

  • High Credit Utilisation Ratio:
  • One of the golden rules you should follow is to keep an eye on your credit utilisation ratio. It is the amount of credit used in proportion to the credit limit that is available to you. According to experts, you should ideally not exceed using 30% of your credit limit. For example, if your credit card limit is Rs.1 lakh, you should spend around Rs.30,000. If you have used over 50% of your credit limit, it can have a negative effect on your score. Having a high credit exposure will send a red flag to lenders as it indicates you are at a higher risk of defaulting.

  • Outstanding Debt:
  • You should always make sure to clear off your outstanding debts. When you have unpaid dues reflected on your credit report, it takes a toll on your score. It is advised to pay off the outstanding dues even if the amount is small.

  • Paying only the Minimum Amount Due:
  • A minimum amount due is a small portion of the principal that is outstanding every month. You may fall into a debt trap if you constantly pay only the minimum amount due. Rolling over the debt by paying only the minimum amount leads to the interest compounding on your outstanding balance. So, it is advised to pay your credit card bills in full. It also reflects poor repayment behaviour.

  • Making Multiple Credit Applications:
  • When you apply for a loan or a credit card, lenders will want to check your creditworthiness and they’ll do this by pulling out your credit report. This is called a hard inquiry. If you send out multiple applications, it will mean that multiple credit inquiries are occurring around the same time. These hard inquiries are reported and affect your score negatively. It will make you look credit hungry.

    If your loan or credit card application has been rejected recently, it is advised to not apply for credit immediately. It is better to improve your CIBIL score and then apply again.

  • Errors in your CIBIL Report:
  • Your CIBIL report has a detailed record of your current as well as past credit accounts. If there are any errors in your report, it can hamper your score. So, if you any discrepancies in your report, you must get them rectified immediately.

    These errors have to be rectified by your lenders only. CIBIL does not correct reports without lenders reporting the changes to be made.

    Also, checking your credit report can also help you identify if you are a victim of an identity theft.

  • Not Having a Credit Mix:
  • It is important to maintain a healthy balance of secured and unsecured loans. Home loans and auto loans are examples of secured loans while a credit card is an example of an unsecured loan. If you have a high number of only one type of credit, it can affect your score. Also, when you have a healthy mix of different types of loans, it suggests that you have experience in handling both different types of loans. This is considered desirable by lenders.

  • Length of the Credit History:
  • In simple terms, credit history means the total number of years that have passed since you have first opened a credit account. If you have a long credit history, it helps lenders take a sound decision at the time of offering you credit. It is better to focus on building a credit history in the earlier stage of life as, by the time you apply for a home or car loan, you will have a good record of credit transactions.

  • Closing old Credit Card Accounts:
  • Credit cards are a great tool to build credit history. However, when you close your old accounts, you end up losing a long credit history associated with it. Therefore, if you have used the card for a substantial number of years, it is advised to keep it open as long as possible, if feasible. Consider closing a card that is relatively new.

Benefits of Having a High CIBIL score

  • Quicker approval for loans and credit cards
  • Cheaper interest rates on loans
  • Better deals on credit cards
  • Credit cards with higher credit limit
  • Discount on processing fee and other charges for loan applications

It is important to check your CIBIL score from time to time. Make sure your score is above 750 to enjoy better access to credit products. You are entitled to receive one detailed credit report for free from CIBIL per calendar year.


TransUnion CIBIL is one of the leading credit information companies in India. The company maintains one of the largest collections of consumer credit information in the world. CIBIL Score plays a key role in the lives of consumers. Banks and other lenders check the CIBIL Score of the applicants before approving their loan or credit card application. Consumers can visit the official website of CIBIL to check their CIBIL Score and Report. CHECK YOUR CIBIL SCORE now.

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