A important guide to CIBIL Score Calculation and the Frequency of Score Updates

Financial institutions usually require a good credit score to approve your application for credit. This 3-digit numerical representation of your credit history informs the lender of your creditworthiness. Therefore, maintaining a high credit score is very important for your financial health.

Why? It helps you get a loan or a credit card quickly and without too many formalities. A high score also helps you get your desired loan amount or a premium credit card as lenders are assured of your reliability in repayment and overall credit experience. Most importantly, it helps you avail of affordable interest rates.

You can check your credit score on any of the four credit bureaus in India:

• CRIF Highmark
• Experian
• Equifax
• TransUnion CIBIL

However, the credit score provided by TransUnion CIBIL is widely accepted and thus relied on by major financial institutions. The score assigned by this bureau is called the CIBIL score. A good CIBIL score for credit card applications or loan applications is usually 700 to 750 and above.

By monitoring your credit score regularly, you can ensure that you are on the right financial path. It also helps you correct mistakes, if any, and take steps to improve your score, when needed.

There are many factors that contribute to CIBIL score calculation and when financial institutions send this information to TransUnion CIBIL, your score is updated. Read on to know the frequency of these updates and how you can improve your score.

Guide to CIBIL Score Calculation
Your CIBIL score depends on many factors and each factor has its own weightage on your score. CIBIL score calculation is done on the basis of the following factors:

30% Hinges on Payment History
Your repayment behaviour has the maximum weightage when considering your credit score. Paying your credit card bills on time and making your EMI payments on time is critical to have a good CIBIL score.

Even foreclosures and prepayments impact your score positively. Remember, with every late payment, your credit score will go down.

25% Hinges on Diversity of Credit Experience
This factor is related to the types of credit you have dealt with during the time you have built your credit history. This relates to secured and unsecured loans as well as credit cards.

Even your Buy Now Pay Later transactions and EMI conversions are recorded by credit bureaus like TransUnion CIBIL. Apart from diversity in type, even differences in repayment tenures are recorded.

25% Hinges on the Amount You Use
Your credit utilisation ratio is also very important when it comes to CIBIL score calculation. This refers to how much credit you use in comparison to what is available to you. Experts recommend having a credit utilisation ratio of nearly 30%.

This means that if you have a credit card with a limit of ₹1 Lakh, you should use only ₹30,000. If you have a higher utilisation, it means you are highly dependent on credit. This brings down your score.

20% is Affected by Other Factors
Factors like the number of credit enquiries you have made in a given amount of time as well as your active debts make up 20% of your CIBIL score.

How Often Are Credit Scores Updated?
Credit score updates are not immediate, but based on when financial companies report transactions to credit information companies and when they update it. This usually happens once a month or once in 45 days. Depending on the type of active credit you have, this may even take 6 months.

Some of the reasons for delays in updating your score may be due to delays in this exchange of information. Not all financial institutions update information to the same credit bureau or all bureaus and this may be why you see different scores or changes in score over a time lag.

When you check your score and credit report, you will see a notification about the date when information was last updated. This will help you get an idea of when the most recent transaction was reported. Based on this, you can check your score and see it change over time.

How to Check Your CIBIL Score?
You can check your CIBIL score on any of the credit agencies in India, online. You can also check your score for free via lenders and financial aggregators or marketplaces. Checking your score requires you to provide your name, phone number and PAN details as most of your financial transactions require this essential information.

You can check your credit score on TransUnion CIBIL with the following steps.

• Step 1: Visit the TransUnion CIBIL website and click on 'Get Free CIBIL score & report'
• Step 2: Enter your name and other details, such as ID type and number
• Step 3: Click on 'Accept & Continue'
• Step 4: Add additional information if needed
• Step 5: Verify your identity through an OTP and you're done!

With these steps, you can view your credit score. If you want to monitor your credit score over time, you will need to subscribe to an annual pack on TransUnion CIBIL by paying a small sum. This way, you can watch your score getting updated over time.

What do different CIBIL Scores Mean?
The highest credit score you can get is 900. However, a score above 850 requires years of maintaining a spotless credit history, which may not be practical for all. Take a look at what CIBIL scores mean, and the percentage of loans sanctioned per score range as per TransUnion CIBIL.

A score above 750 is the perfect CIBIL score for credit cards and unsecured loans that lenders offer without any security. For secured loans, a score of 700 and above may work, based on the lender's policies and terms.

How Can You Boost your CIBIL Score?
To improve your credit score, you should take the necessary steps to improve your credit behaviour. This includes to avoid missing any credit-related payments, ensuring your utilisation of credit is not too much and not sending out too many loan/credit card applications at the same time. Getting a higher credit limit on your credit card and using up to 30% only can also help you improve your score.

With these tips, you can improve your CIBIL score for credit card or loan applications and enjoy seamless approval and affordable access. As you may have noted, CIBIL score calculation is based on important aspects of credit behaviour, and by tackling them you can see steady improvement. Give yourself 6 to 18 months to see your credit score improve and work towards financial fitness!