What is CIBIL Score & How Does it work?

What is CIBIL Score & How Does it work?

‘CIBIL Score’ or credit score becomes extremely important when assessing home loan eligibility or taking any other form of a loan. Applicants must check their score and figure out if it is above a certain number to understand their eligibility, the likely ROI they will be charged and plan their loan accordingly. To the unaware, a CIBIL score might sound like marks obtained in an important professional examination. But that is not the case. It is, in fact, an assessment of an applicant’s creditworthiness. 

So, what is CIBIL score, how does it work and why is it so important when it comes to home loans? Let us tackle this subject broadly in the following blog.

What is CIBIL Score? 

A CIBIL score is a three-digit number that denotes the applicant’s credit history and performance. It ranges from 300-900. An applicant with a higher score is deemed as a lesser risk for lenders.  Thus, the higher the CIBIL score, the worthier of credit an applicant is. This ultimately translates into greater eligibility for any given loan request – even a home loan. 

To understand the three-digit CIBIL score better, it is first important to know what is CIBIL.

CIBIL stands for Credit Information Bureau (India) Limited – a credit information company licensed by the Reserve Bank of India. 

CIBIL is the oldest credit rating agency in India and is a part of the American TransUnion multinational group. 

Essentially, CIBIL has tied up with banks and financial service providers to collect and maintain records of loan and credit transactions of individuals and businesses. 

By compiling these credit records, CIBIL can assess the credit performance of entities – whether they are taking up too many loans, whether they are defaulting on loans, etc. 

This track record enables CIBIL to derive a credit rating for everyone so that whenever they apply for a future loan, lenders can assess how much of a risk it is to sanction it.

CIBIL has credit information on over 600 million customers and 32 million businesses. It is by far the most preferred credit rating by lenders in the country. 

Now it is time to learn more about how the CIBIL score is recorded. 

Must Read: What is The Good CIBIL Score for Home Loan?

What is CIBIL Report?

Wondering how credit information is stored and recorded by CIBIL? That happens via a CIBIL report. 

A CIBIL report or a Credit Information Report is a record of all credit transactions of an individual or a business 

It includes information such as past and ongoing loans, repayment and borrowing history, any credit card dues, default payments, EMI transactions, etc. 

Additionally, a CIBIL report also compiles an individual’s employment profile as well as all the instances of r loan enquiries made by the person. This gives the lender checking an applicant’s report a more holistic view of the financial profile. 

Individuals can easily download and check the CIBIL report from the official CIBIL website. Lenders also provide this facility via their apps and websites for a nominal fee. 

Thus, a CIBIL report is one of the requisite documents required by lenders. 

How Does CIBIL Score Work?

Now that we’ve discussed what is the meaning of CIBIL score, it is time to understand how it is calculated and how it works. 

The CIBIL score is not fixed. It is constantly fluctuating based on the individual’s credit history and performance. Here are the four factors that affect it:

Payment History – If an individual fails to clear loan payments and EMIs on time or consistently default on them, then theCIBIL score goes down. 

Credit Mix – If the applicant has a balanced mix of secured and unsecured loans, then the CIBIL score will remain positive. Here, secured loans are loans like home loans, car loans, etc. while unsecured loans are credit card bills, personal loans, etc.

Loan Enquiries – Having multiple credit or loan rejections in the report can hamper the score. Similarly, if the individual has recently availed multiple loans, then their debt burden will rise, thus negatively impacting their credit rating and cautioning lenders against future loans.

Credit Utilization – The higher the credit card balance usage, the more the holder is in debt, thus hampering their CIBIL score.

By assessing all these parameters every month, CIBIL creates an updated score for each individual. So, whenever an individual applies for a loan next, the lender will assess their latest CIBIL score and report in the application process for their financial credibility. If they pass the requisite criteria for a loan, it will be sanctioned swiftly. Otherwise, the application will be rejected or the interest rate will increase. 

Importance of CIBIL Score – Why Does It Matter?

CIBIL score is proof of a person’s creditworthiness and an important eligibility criterion in the loan application process. 

The better the CIBIL score, the better are an applicant’s chances of approval. A high CIBIL score will fetch the best possible loan terms as well. 

A low CIBIL score can reduce chances of availing any loan in the future.

What is the Best CIBIL Score? 

We have all learned the importance of having a good CIBIL score. But what is the best CIBIL score? 

Well, the ideal CIBIL score to meet the requirements of a certain loan depends on lender to lender. For a home loan, a CIBIL score above 700 or 750 is ideal. Of course, the higher the CIBIL score, the better home loan terms an applicant will get – including lower home loan interest rates. Generally, all lenders have different slabs of interest rates for different CIBIL score ranges. 

Ultimately, to avail of the best home loan offers, face zero eligibility issues, and gain swift loan application approval and loan sanction, it is best to keep the CIBIL score above 800. 

Must Read: How to Improve your CIBIL Score from 500 to 750?


Maintaining a good CIBIL score is vital. Here’s how to do it:

Never default on payments and EMIs.

Keep credit balance and borrowings low. 

Keep a good credit mix. 

Do not apply for loans or avail credit excessively.

Always check and maintain the score regularly.

Improve CIBIL score first before applying to avoid rejections.

At Housing, we have relaxed credit score criteria to help everyone avail of a home loan without any hassles. Check this link to assess home loan interest rate eligibility for various CIBIL score ranges.

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