Thursday, 1 October 2015

How to do CIBIL score calculation?

In the process of checking CIBIL scores, there is no such given model for knowing how to compute them; nonetheless, one should be aware of the factors that make up a CIBIL score. We can review factors that CIBIL considers for computing credit scores of loan borrowers. Which are: loan repayment history, total outstanding on the loan you have borrowed, the tenure of your loans or credit, the mix of types of loans you have and number of loan enquiries you make. These factors are significant from the CIBIL score calculation perspective.

Let us understand the factors in detail:

1. Your pattern of loan repayment: The most important factor that has a major impact on how your CIBIL scores are calculated, is how you are paying back to your lenders. What this means is, how punctual you are in paying back the amount you owe to your lender/s. It is also important to make payments in full and not manipulate the amount due.

2. Outstanding balances: Whatever amount you owe to your credit card companies or loan lenders, is known as the 'outstanding balance' and is important for CIBIL score calculation. If there is a lump sum amount outstanding, it will lower the CIBIL score. If the outstanding figures are low, it will not hamper the CIBIL score.

3. Credit age: For how long have you been servicing loans, or using credit cards, is known as the 'loan-age' or 'credit-age' and impacts the CIBIL score calculation.

4. Credit Mix: Credit mix means the combination of the types of loans that a customer is servicing. If they are doing different types of loans, that includes for example: a home loan, an education loan, a personal loan, a vehicle loan or a combination of credit cards – it impacts the CIBIL score positively.

5. New credit enquiries: The number of new loan enquiries made by a customer impact a CIBIL score. The lesser the number of enquiries, the better is the CIBIL score. The more the enquiries made about loans, the lower will be the CIBIL score, because, that customer will be perceived as credit-hungry or desperate for loans.
One must make new enquiries about loans only when there is a need to take a loan.

There are negative flags also, that impact a CIBIL score. Negative flags are an indication of any default on the customer's end while using a credit product or servicing a loan. Negative flags will lower the CIBIL score.