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CIBIL Enhances Credit Score Algorithm

The creditworthiness of an individual or business in India is rated by the CIBIL score. A higher CIBIL score means that the probability of the person or entity defaulting on a loan is lower and vice versa. It is calculated based on credit history in particular and financial history in general — taking into account factors such as outstanding debt, number of loan enquiries made, payment history, the amount of credit used as a proportion of the available credit limit etc. The CIBIL score has a range of 300-900. A score above 700 is generally considered good whereas a score below 550 is bad. In the spectrum, 550 – 649 is considered poor, 650 – 699 is deemed fair and above 750 is considered excellent.

CIBIL score update

If you track your credit score frequently, you might have noticed a decrease in the rating recently. This has happened because TransUnion CIBIL, the company which is responsible for maintaining the score, has altered the algorithm used to calculate the number. However, many lenders have said that a lower score won’t necessarily hurt one’s chances of availing a loan as they have taken into account the new CIBIL score algorithm to tweak their lending policies.

You can also check cibil score by pan card easily through Finserv MARKETS

What does the CIBIL score update include?

The biggest change in the CIBIL score algorithm is that it considers 36 months of credit history now, compared to 24 months earlier. Another important departure from the past is that it now scores consumers with less than six months of history, whereas one had to build six months of credit history before getting a number earlier.

Here are some of the new factors included in the modified CIBIL score algorithm, according to the TransUnion CIBIL website:

  1. Depth of credit (i.e. the duration of your existing credit history as calculated from the date when your oldest credit account was opened)

  2. Number of old accounts closed and new accounts opened

  3. The trend of one’s outstanding balances over the long term

  4. The ratio of actual repayment amount to the total amount due on a loan

  5. The transaction history of an individual or entity on their credit card(s)

What does the CIBIL score update mean for you?

If the change in the CIBIL score algorithm has caused your credit rating to drop, it doesn’t mean that any of the factors that determine it has deteriorated. For instance, it might have dropped even if you have paid back all your loans. The update only widens the scope of the calculation rather than downgrading one’s creditworthiness. As such it wouldn’t change the way a lender views your loan application, according to the TransUnion CIBIL website.

Another important point to note is that all lenders might not have migrated to the new CIBIL score as yet. This means that your bank is still using your older score whereas your CIBIL dashboard shows a new score. The recalibration will take some time but eventually all financial institutions will adopt the updated score.

Credit Score is accompanied by a score analysis that tells you which factors in your profile could be improved to boost your rating. As the algorithm has changed to include more factors, the score analysis will provide an explanation of a wider number of points one could work on to have a better credit rating. The general to-do list of maintaining a good credit score however remains the same — pay your dues on time, have minimum balance as possible and don’t apply for a lot of credit.


CIBIL maintains the credit information of 600 million people and over 30 million businesses. Of that, 60% had a credit score of 775 or more in January whereas the number had dropped to 37% in May. One need not worry if the rating decreased as lenders wouldn't just overlook such a huge chunk of the creditworthy population.

If you are still unsure, then you could take a look at the population ranking section on your CIBIL dashboard which shows where you stand with respect to other consumers availing the score.

A good CIBIL score can help you get a loan at a relatively better rate of interest. At Finserv MARKETS, you can get a free CIBIL report on your credit. The Credit Health Report is more than just your credit score. It provides you with an analysis of your financial health and helps to improve and maintain it.

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