What is the CIBIL score?
29 Sep 2021

What is the CIBIL score?

Decoding the concept of CIBIL score.

Key Takeaways

  • A CIBIL score is a three-digit numeric summary displaying your credit behaviour.
  • Your CIBIL score determines your creditworthiness as a borrower.
  • Higher the CIBIL score, the more potential you have as a borrower.
  • Your credit, repayment history, and debt amount have a stronghold over your CIBIL score.
  • You can improve your CIBIL score by making regular payments.

When you apply for a loan or borrow money from a lending institution, the lender asks you to provide various documents. While the general ones include your identity, address, and income proof document, there is one more document through which the lender decides if you are creditworthy. This document is known as your credit or CIBIL score document. As a borrower, you may have wondered why the CIBIL score is so important. But before we dive into the topic, let us first understand the concept of CIBIL score in detail.

What Is CIBIL Score?

CIBIL score is a three-digit numeric summary of your credit report. It ranges from 300- 900 points. The score reflects your credit repaying capacity. The higher your score, the more readily a bank offer you a personal loan or credit card. With a high CIBIL score, you can establish yourself as a trustworthy borrower.

The CIBIL score is calculated using a mathematical algorithm that considers several financial factors like your credit history, repayment history, and total debt level. Your payment history depicts how regular you are with your payments, while the full level of debt reflects your credit utilisation.

Why Does the CIBIL Score Matter?

Your CIBIL score plays an integral role in most of your financial activities. It is the critical decider for a bank when it comes to lending loans. Your CIBIL score influences your loan application processing time, interest rate, repayment tenure, credit offered and even your down payment amount.

If you have a lower CIBIL score, lenders will consider you relatively risky as a borrower. Lenders may charge you a higher interest rate to compensate for the high-risk factor. In some cases, they may provide shorter repayment tenures on loans and ask for a co-signer as a guarantee.

Conversely, when you have a high CIBIL score, lenders offer loans at lower interest rates. This means you end up repaying a lesser amount in comparison to someone having a lower CIBIL score. Furthermore, banks offer to increase your credit card limits if you have a high CIBIL score as you are deemed a risk-free borrower.

What are the Ways to Improve the CIBIL Score?

Here are some ways to improve your CIBIL score and make your profile look stronger.

  • Be regular with your payments.
  • Do not default on Loan EMIs.
  • Utilise only up to 30 per cent of the credit limit on your credit card.
  • Close credit cards that are not in use.
  • Avoid reapplying for loans and credit cards that did not get approved in quick succession.
  • Do not send several loan applications in a short span of time.


Keeping a check on your CIBIL score is a must. You can check your credit score for free for the first time on the CIBIL website. After the free report, you can select various payment options based on how often you want to know your credit score.

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*Disclaimer: This article is for information only. We recommend you get in touch with your income tax advisor or CA for expert advice.