Confused about your credit score? Know how your CIBIL TransUnion Score is calculated!

We have talked about how CIBIL’s TransUnion score can make or break your financial viability while applying for a loan. But ever wondered how is your credit score calculated?

According to Harshala Chandorkar, senior vice president- consumer services and communication, CIBIL, while preparing the credit score, emphasis is laid on three major pointers—past financial performance, credit exposure and credit type and duration.

“While calculating a person’s CIBIL TransUnion Score, 30% emphasis is given on the past performance while 25% each is laid on credit exposure and credit type and duration. Remaining 20% comprises of other factors,” said Chandorkar. Other factors include the credit utilization, recent credit behavior which comprises the remaining 20% of the score.

So, how exactly is this CIBIL TransUnion Score calculated? One must remember that an individual with a credit score of 750 and above are generally considered financially healthy by credit institutions.

“Your CIBIL TransUnion Score is calculated based on the information in the “Accounts” and “Enquiry” section of your CIBIL Report. The score is calculated based on how much credit is the consumer using or how many accounts are past due and by how many days?” she explained.

In terms of the ‘trade attributes’, CIBIL takes into account whether the individual has the right mix of credit. For instance, if a consumer relies heavily on credit cards, his score will be comparatively lower than someone who uses credit cards up to a certain limit.

Chandorkar noted that these factors are taken into consideration while preparing an individual’s credit report as these factors determine the person’s chances of defaulting on a loan if he gets one.

A strong past credit performance strengthens an individual’s financial credibility while the type of loan taken by an individual—secured or unsecured loan helps a bank determine the risks involved in extending a loan to the person.

It should be noted that CIBIL Report and CIBIL TransUnion Score are not pointers to whether your loan application gets approved but also plays a pivotal role in laying down the terms and conditions on which you can avail the loan.

“The higher the credit score, the better your chances of availing the loan faster and on favorable terms. It is advisable to check your CIBIL Report and CIBIL TransUnion Score before applying for a loan. Timely payment of EMIs is most important for maintaining a good credit history and a healthy credit score,” reiterated Chandorkar.