How is the Credit Score Calculated in India?

Last Updated : Jan. 18, 2025, 3:25 p.m.

The credit score is a very important parameter that determines the approval of loan and credit card applications in India. Not only this, it also comes into the picture during insurance application approval, employment, renting out an apartment, etc. (Although the latter 2 are not very widely practiced in India). If your credit score is good, lenders will process your credit application quickly. You can get preferential interest rates, credit limits, loan amounts, and loan terms. On the other hand, if your credit score is not good, your loan and credit card applications are more likely to be rejected. In India, there are 4 credit bureaus which give you the credit score, and they are Equifax, Experian, TransUnion CIBIL, and CRIF HighMark. Let us now understand how this score that changes your financial prospects is computed.

How is Your Credit Score Computed?

The following factors contribute to your credit score.

Highly impacting Factors

Payment History: Your payment history is a track record of all your defaulted payments, timely payments, bankruptcies, etc. In short, it reflects how you are able to handle credit. Car loans, personal loans, home loans, credit cards, etc. are all included in your payment history. Algorithms for computing the credit score take into account your payment history, outstanding amount, and how many payment defaults you have.

Credit Utilization Ratio: The credit utilization ratio is yet another major factor that influences your credit score. It is the percentage of your available credit that you are currently using. A high CUR impacts your credit score. Besides that, a high CUR indicates that you are overspending. Experts recommend you to maintain a CUR within 30% to 40%.

Averagely Impacting Factors

Age of Credit: A credit history with longer length impacts your credit score positively. So, it is a good idea to keep your old accounts and credit cards which have a good credit history open (Even if you have paid off the debt). They reflect the association you have had for several years with lenders and the financial discipline you have exhibited . Lenders can determine whether to give you a loan or not based on the length of your credit history.

Low Impacting Factors

Total Accounts: It is good to have a diverse portfolio of credit. Have a mix of various types of credit like instalment loans, revolving credit, mortgages, etc. Having a credit mix gives the impression on lenders that you can handle different types of credit efficiently at the same time. It is also essential to maintain an equal balance between secured and unsecured credit. A healthy credit mix is good for your credit score.

Free CIBIL Score Check

Factors That are Not Considered for Credit Score Calculation

Factors that are not considered for credit score calculation are age, current income, duration of employment, etc. These are additional details that the lender will inquire about in order to process your loan application.

CIBIL Credit Score Range

Experian Credit Score Range

Equifax Credit Score Range

CRIF High Mark Credit Score Range

Tips to Improve Your Credit Score

• Avoid late or missed payments
• Maintain a low credit utilization ratio
• Ensure to pay off outstanding debts and close the account instead of going in for a settlement. Make sure that the account has its status as ‘closed’
• Monitor your credit report regularly.
• Use credit responsibly.
• Maintain a good credit mix

Parameters That Credit Bureaus Use to Calculate Your Credit Score

There are predominantly four credit bureaus – TransUnion CIBIL, Experian, Equifax and CRIF High Mark – operating in India. These bureaus use their algorithms based on the following credit aspects to calculate your credit score in India.

Let’s read more about these parameters.

Repayment History – It contains a weightage of more than one-third of your credit score and includes everything from the payment dates, instances of payment delays or defaults, and debt settlement if exercised. The timely payment track of loan EMIs or credit card dues for long could so easily take your score to the highs. Payment delays for not more than 30 days will not have any impact on your credit score. Because, by that time, the lender won’t have reported it to the credit bureau it has tied up with. If the delay stretches past 30 days, the credit score will come down.

Ideally, one should spend in a way that he/she pays his/her loan EMIs of credit card dues on time. However, due to the unpredictable nature of life, there could be an odd delay, but you better not get overly concerned. Instead, pull some out of your savings to pay off your dues within 30 days of the scheduled payment date. But don’t make it a habit as that could be viewed as a deliberate attempt from you by the algorithms that bureaus use.to calculate credit scores in India.

Debt settlement is an option that one uses to reduce the debt in a legal agreement with the lender. If you have done it in the past, you might have got away by paying a reduced debt amount which otherwise would have been massive. But doing so might reflect badly on your credit history, if not your credit score. This might shut the door for any unsecured credits such as personal loans and credit cards. However, the option of secured loans or secured credit cards is always there with you. While secured loans can be granted against securities or collaterals such as fixed deposits, public provident fund, national savings certificate, etc, secured credit cards are given against fixed deposits only. Lenders don’t feel much of a risk as they could recover the money by seizing your security/collateral in case you default.

Amount Owed by Borrowers – This is a very intriguing and delicate concept to understand. As a borrower, you could owe to lenders in the form of several credits. The bureaus will add all the loan amounts to ascertain your credit score. When it comes to credit cards, the concept of ‘Amount Owed’ will vary. With a credit card, you are not deemed to be on credit if you pay all your dues on time. Only when you delay or pay the due partially do you go into the debt cycle with interest and late payment charges levied on your outstanding balance. If the amount owed is too high and you’re committing long payment delays or defaults, it can impact your credit score negatively.

Length of Credit – One may not want to service the debt for long, but there are long-term loans such as home loans that keep adding to your credit history. But that will also end sometime. Loan records remain in your credit history for at least 7 years from their last repayment date. With credit cards, though, the credit history can be as long as your life. And there are people with multiple credit cards (both old and new ones). Old credit card accounts, if maintained well with a solid payment record, can add so much to your credit score. There may come a time when you wish to close some of your credit card accounts. If you do come to that point, ensure you close the newest accounts so that your credit score doesn’t take a bite. However, if you close the old accounts, it might lower your credit score.

Credit Mix – One should have an ideal mix of secured and unsecured credits to build a strong credit history. Too much of unsecured credit lines can become a bone of contention for you on committing late payments. As they are not backed by securities or collaterals, a poor repayment track of them can dent your credit history.

Recent Loans Availed or Applied for – This can also have a bearing on your credit score. The bureau will check the repayment track of the loans that got disbursed to you recently. There could be some loans you might have applied for without any success, which means the applications that have got rejected. The rejection of recent applications does impact your credit score negatively. It’s because of the hard credit enquiries that lenders make. And when you make multiple applications at different lenders, chances of rejections only mount. This is because all these lenders will pull your credit reports from the bureaus at the same time. These hard credit enquiries may prompt bureaus to lower your score by creating an impression that you are credit-hungry. Ensure you don’t apply everywhere at the same time if you care for your credit score.

How to Check Your CIBIL Score on Wishfin?

You can check your CIBIL score for free on Wishfin. You can also view your CIBIL report after logging in.

Step 1: Go to the official website of Wishfin

Step 2: Click on ‘ CIBIL Score ’

Step 3: Enter your first name, middle name and last name

Step 4: Enter your date of birth

Step 5: Select your gender

Step 6: Enter your PAN number

Step 7: Specify your monthly income

Step 8: Select your employment status

Step 9: Enter your employer name

Step 10: Enter your email address

Step 11: Enter your mobile phone number

Step 12: Click ‘Submit’

After the verification processes, the login credentials are sent to your registered email address through which you can check your CIBIL credit report for free .