CIBIL Score - A Practical Guide

[SSV]

CIBIL Score - A Practical Guide

Discalimer: This is mainly for regular Credt Card users who pay all their dues before due date and wondering why their score is not increasing..
Here we dont discuss the cases where there were defaults and / or delayed payments..that is for another day..​

Ladies and Gentelmen,

Here is the much awaited post on CIBIL Score and how it works and what we should do to improve it over the period of the time..

Here I won't go in detail about how the score is constructed as there were numerous posts on the internet in explaining the CIBIL score in an academic way..
Here we will concentrate more on practical things..

Lets get started..

CIBIL Score's main constituents:

1) Payment History
2) Utilisation
3) Number of Enquiries in the recent past
4) Credit age..
5) Credit Mix

1) Payment History

We should pay all dues before the due date in order to have an excellent score and minimum fainancial burden on us.. This many of us do anyway..

TIP: we should atleast pay Minimum Amount Due( MAD) before the due date atleast - this will safeguard the score,
but will impact us financially if we pay only MAD and leave the rest...

Best practice:
1) Pay MAD immediately after the bill is generated - This will protect the score, in case you failed to pay the full before due date.
2) Pay the full amount due at least 5 days before due date. - ideal case scenario.
3) Pay the full amount even before the bill generations / month end- the best case scenario- will discuss this in detail at the end..

2) Utilisation

There is a notion that if we have <30% overall utilisation then it is good..
Lets dig deep into this..

The prinicple is : the higher the utilisation ratio, the lower the score.. and vice versa ...Period..
So, the aim should be the utilisation ratio should be as minimal as possible. ( it can even go into -ve, this is the best case scenario)..

How this works practically:
It works in range bound basis: like 0 to 10 % , 10 - 20 % and 20 - 30% etc.
Note: these exact range numbers are hypothitical.. trying to explain the logic...
For example: 0- 10% utilisation ratio will have better score than 10- 20% and
10- 20% utilisation ratio will have better score than 20- 30% ratio..

Once it crosses 30% utilisation ratio it will have big negative impact on the score.. hence need to maitain less than 30% ratio to have a decent score.

Tip:
This uitlisation ratio is calculated both on
1) overall basis ( on all accounts together) and
2) Individual account level basis..

Both of the above ratios will have their weightage in the score construction.

Example:
You have 10 accounts with a total of 10 Lakhs sanctioned limit and total utilisation of 2 Lakhs
Here the overall utilisation is: 20%, which is okay as it is under 30%..
But if one of the accounts has 50% utilisation ( ie, one account which has 1L limit and utilsation with 50K).
In this case , score will have big negative impact even though your overall is less than 30%...

BEST practice:

Make sure each and every account utilisation is less than 30% to start with
and as low as possible to have as better score as possible.. ( It can go to negative as well .. this is the best possible scenario)...

3) Number of Enquiries

This is where a lot of people have confusion..

The basic rule:
The longer the credit history , the lesser the impact of number of enquiries on the Credit score...

In practical terms:
Once your credit history crosses the age of 5 years, the no. of enquiries' negative impact diminishes..

Say if you have 6 years of credit history, then 5 or 10 enquireis in the past 1 to 3 months will not have any impact on the score.

If your credit history crosses 10 - 15 years , you can safely forget about the concept of number of enquiries...

TIP:
Even if your credit score is impacted because of no of enquiries, the score will recover pretty fast ie. within 2 to 3 months.
Only people with less than 5 years of credit history should be careful about the no of enquiries..


4) Credit age

The longer the Credit age the better the score and score's stability...
For a person who has a credit age of 15 to 20 years, the fluctuation in his/ her score is very minimal...

Again, after the age of 5 years , the score will get a bit of the boost and started to get stabilised..
Obviously the more older the credit profile the better.
when you are trying to close your oldest credit card account, please check what is the second oldest account's age, if it is more than 5 years, no need to worry..

TIP:
Check score predictor in the offical CIBIL app and predict your score by selecting the oldest card's closure.. this will give a very accurate prediction in my experience.

5) Credit Mix

Obviously, a mix of sceured and unsecured loans is a better indicator rather than having only unsecured loans...

However, what I observed in practice, except for Home loan all other Secured loans have no / minimal postive impact on the score..

Home Loan- will definitely improve your score by around 10 points.
Gold Loan and Loan against FD - have no positive impact on the score in my experience. in fact it had a negative impact as it is carrying some current balances..
Auto Loan - also may not have a positive impact..

Now coming to some other interesting bits:


SSV's Pro Tip:

1) Make current balances <=0 on each and every account as on Reporting Date ..

Maitain 0 or negative current balances on all accounts to get a boost of about 10 points to your score
Then you may ask what is the purpose of having 45 /50 days of free credit period..
Correct. this may not be useful for those who want to utilise full free credit days, but for those who want to boost their credit score for any other purposes temporarily this is one of the great tools which is in our hand..
I will also tell how to get this 0 utlisation along with availing free credit period to some extent for some bank credit cards..

We all know that different banks report balances on different dates.
We classify them as banks reporting balances as on
1) month end
2) bill generation date

The KEY here is current balances as on REPORTING Date ...
This Reproting date can be month end or bill generation date depending upon the bank.

1) For those that report balances as on month end ie.
AXIS, BOB, HDFC, HSBC, IndusInd, IDFC, Kotak, RBL , Stan C, YES ........
For these banks, make sure your due date falls on 1st of every month, so that means, your statement generation datee should be around 14th of every month so that bill DUE date is around 1st or 2nd of the following month...

In this case, you can have your full amount outstanding as on 14 th, but pay the full amount by 30th of every month..
So at the end, your current oustanding balances should <= 0 as on 30th.. this solves the issue.

2) For those banks who report on bill generation date, there is no escape: you have to pay just before bill generation date and make sure bill amount is <= 0,,,


2) HIGH Credit in CIBIL report:

There is one data item called " HIGH credit " in CIBIL report..
what it means : the highest amount used / billed in any credit account during the life time of that account...

This generally doesn't have any direct impact on the credit score except in the cases of charge cards like amex Gold, Platinum cards etc where there is no set sanctioned limit..
This was applicable until recentlty on HDFC cards as well, but HFDC now reports sanctioned limits to credit bureaus..

However, this data item potentially will be useful for lenders to know more about us with regard to
1) Potential high spender
2) giving better credit limits at the time of application..

I am not sure if the Indian lenders are incorporating this in their credit card application evaluation as of now.. I am sure in future they may use this..

How this should work:
Total amount used ie. debited duiring a staetment period should reprorted as HIGH Credit to the bureaus..

Scenario 1:
Take a case of what I generally do:

I have a card with sanctioned limit of 5L and I use it for 2L in one month and pay in full before the bill generation date.
This is how it will be reprted in this case:

Sanctioned Limit: 5L
High Limit : 2L
Current Balance : 0

This stat should WOW a potential lender towards me.. Why?
I am using 40% of sanctioned limit and paying in full back to account before the bill generation.
Means I am a high spender and very obedient in paying back before bill generation date..
and hence they should love to give me their card with generous limits..

Scenario 2:
Take another example of oppostie side:

Sacntioned limit: 5L
High limit :20K
current balance: 20K

In this case, Bank is wasting sanctioned limit on this person, as he is only using 4% of sacntioned limit ..
So , in this case this customer is not a high spender ( hence not much income to the Bank) and there is no point in giving him higher limits as well ..

As per my observation only SBI and Amex is reprortng this HIGH limit correctly in true sense.
(--EDIT: YES bank is also doing the same as per @reach2dpg )
ie.
same example:
spends of 2L , paying full before bill generation:
SBI and AMEX reported
as CL :5L
High Limit 2L and
Curre balance : 0

where as all other banks reported as
CL :5L
High Limit : 0 and
Curr Balance :0..

For other banks to report correct high limit ,we need to have full balance outstanindg as on bill generation date at least for one statement period....

Look at the example of my ICICI account



In the above example, my highest bill oustanding duirng one statement period was 2.15 L out of 7.7L sanctioned amount ..and current balance is Zero..
Means I am a good boy. A high spender who pays bills before bill generation.. Banks would love persons like these...

So, with regard to HIGH limit:
My TIP:

Use your card just once for a very big amount and get it reported as HIGH limit , and from then on-wards use as per your normal usage...


This post became too big..but I wanted to share all my knowledge as far as CIBIL score is concerned..

All the best guys...

Have fun
Enjoy.....

 

[SSV]

Got it. So I'll try again in a couple of days then.

Because it is Sunday today, you will most likely the update by tomorrow.
Amex is very very quick, HDFC is also quick these days..
Only ICICI is the laziest of the lot..

 

[350modena]

Because it is Sunday today, you will most likely the update by tomorrow.
Amex is very very quick, I think so as HDFC also these days..
Only ICICI is the laziest of the lot..

Thankfully I only have Amex and HDFC! 🙂

 

[SSV]

Thankfully I only have Amex and HDFC! 🙂

Wow, I predicted your card portfolio also 😉

 

[350modena]

Wow, I predicted your card portfolio also 😉

Haha you did! I keep thinking I'll get something more but nothing seems to make sense!

 

[SSV]

Haha you did! I keep thinking I'll get something more but nothing seems to make sense!

Yes.. no need to get the cards unless you find proper use case..
Keep it neat and tidy ..
all the best

 

[350modena]

Yes.. no need to get the cards unless you find proper use case..
Keep it neat and tidy ..
all the best

Yup, neat n tidy it is, thanks!

 

[asm07]

I have noticed a change the way ICICI reports utilisation to CIBIL and other bureaus. Until March 2024 (last financial year) they were only reporting the billed amount each month, be it zero, negative or positive. But since April, they are including the unbilled principal amount of ongoing EMI. Because of this my utilisation increased from 3% to 14% in April. Though the highest credit used is reported separately, the balance amount now includes unbilled principal amount of a loan.

I asked icici about it, and their executives were giving different replies. Some were saying share your CIBIL in the next month to check, utilisation should be the billed amount as per them (which I was claiming as well). But some other were saying utilisation always included the remaining principal of a loan along with a month's bill. When I asked "then why wasn't it showing till March but suddenly started from April? If there's any change then just tell which will clear my doubts" but the executives went even ahead and told me that "we have been reporting like that since always. If CIBIL wasn't including that in utilisation it's their issue." I mean like what the heck 😂

 

[SSV]

I have noticed a change the way ICICI reports utilisation to CIBIL and other bureaus. Until March 2024 (last financial year) they were only reporting the billed amount each month, be it zero, negative or positive. But since April, they are including the unbilled principal amount of ongoing EMI. Because of this my utilisation increased from 3% to 14% in April. Though the highest credit used is reported separately, the balance amount now includes unbilled principal amount of a loan.

I asked icici about it, and their executives were giving different replies. Some were saying share your CIBIL in the next month to check, utilisation should be the billed amount as per them (which I was claiming as well). But some other were saying utilisation always included the remaining principal of a loan along with a month's bill. When I asked "then why wasn't it showing till March but suddenly started from April? If there's any change then just tell which will clear my doubts" but the executives went even ahead and told me that "we have been reporting like that since always. If CIBIL wasn't including that in utilisation it's their issue." I mean like what the heck 😂

Is this EMI taken on CC?

 

[rogerthat]

​

SSV's Pro Tip:

1) Make current balances <=0 on each and every account as on Reporting Date ..

Maitain 0 or negative current balances on all accounts to get a boost of about 10 points to your score
Then you may ask what is the purpose of having 45 /50 days of free credit period..
Correct. this may not be useful for those who want to utilise full free credit days, but for those who want to boost their credit score for any other purposes temporarily this is one of the great tools which is in our hand..
I will also tell how to get this 0 utlisation along with availing free credit period to some extent for some bank credit cards..

We all know that different banks report balances on different dates.
We classify them as banks reporting balances as on
1) month end
2) bill generation date

The KEY here is current balances as on REPORTING Date ...
This Reproting date can be month end or bill generation date depending upon the bank.

1) For those that report balances as on month end ie.
AXIS, BOB, HDFC, HSBC, IndusInd, IDFC, Kotak, RBL , Stan C, YES ........
For these banks, make sure your due date falls on 1st of every month, so that means, your statement generation datee should be around 14th of every month so that bill DUE date is around 1st or 2nd of the following month...

In this case, you can have your full amount outstanding as on 14 th, but pay the full amount by 30th of every month..
So at the end, your current oustanding balances should <= 0 as on 30th.. this solves the issue.

2) For those banks who report on bill generation date, there is no escape: you have to pay just before bill generation date and make sure bill amount is <= 0,,,

Thank you sir for this excellent very well detailed and analyzed research and post, and especially this bit about balances. Helped me realise a few things about my credit report too.

I consider credit cards to be useful tools primarily for the extended credit period and use them as such. To this effect all my cards have statement date of 18th and due dates falling at around 6th to 8th. In this way I can make maximum utilisation of the credit period through payment based on salary credit periods, effectively giving me two months credit period. For instance, a purchase made on the 20th needs to be paid only with the salary of two months later.

However, after reading your post I realised that my account will show huge balance at the end of the month because all card statements were all generated on 18th and payment happens only after salary credit at the beginning of the month. This could be the reason why my credit score isn't great (754-762) and refuses to increase. I could change the statement date to the 3rd so due date would be 20-23rd and hence balance would be zero at the end of the month. However this comes at the cost of reducing my extended credit period from two months to one month (any purchase needs to be paid off with next month's salary).

This now has me in a fix on what do to.

 

[SSV]

Thank you sir for this excellent very well detailed and analyzed research and post, and especially this bit about balances. Helped me realise a few things about my credit report too.
I consider credit cards to be useful tools primarily for the extended credit period and use them as such. To this effect all my cards have statement date of 18th and due dates falling at around 6th to 8th. In this way I can make maximum utilisation of the credit period through payment based on salary credit periods, effectively giving me two months credit period. For instance, a purchase made on the 20th needs to be paid only with the salary of two months later.
However, after reading your post I realised that my account will show huge balance at the end of the month because all card statements were all generated on 18th and payment happens only after salary credit at the beginning of the month. This could be the reason why my credit score isn't great (754-762) and refuses to increase. I could change the statement date to the 3rd so due date would be 20-23rd and hence balance would be zero at the end of the month. However this comes at the cost of reducing my extended credit period from two months to one month (any purchase needs to be paid off with next month's salary).

This now has me in a fix on what do to.

A Very good question, In deed... and the answer is:

Simple and easy:

Whenever you want your CIBIL to be on higher side, like at the time of Home Loan , or for any other purposes, maintain 0 balances and get the score a boost.
or else during normal time, you can maitntain, normal balances .. as simple as that..

If you dont care about your CIBIL score, just have your balances as much as you want..

at the end of the day, purpose of the post is : to understand how the score reacts in different situations,
Use this info to suit your needs and to your advantage.

Thanks for the appreciation..
I am gald that your liked post and expressed the same....
Enjoy..

 

[asm07]

Is this EMI taken on CC?

Yes. Emi is ongoing since November 2023. The change happened after April. I checked with a friend who also has icici cc, same thing. So possibly a change in the way of reporting. My concern is icici customer support executives are also unaware and don't have any clue.

(For example a amazon/flipkart purchase of 60k is under EMI. Roughly the EMI is 5k for 12 months. Let's say out of 60k, 25k is paid till March. Remaining 35k is reflecting under utilisation which wasn't happening till April this year. Otherwise in November itself the utilisation would be 60k plus the billed amount that month but it was only billed amount.)

 

[SSV]

Yes. Emi is ongoing since November 2023. The change happened after April. I checked with a friend who also has icici cc, same thing. So possibly a change in the way of reporting. My concern is icici customer support executives are also unaware and don't have any clue.

(For example a amazon/flipkart purchase of 60k is under EMI. Roughly the EMI is 5k for 12 months. Let's say out of 60k, 25k is paid till March. Remaining 35k is reflecting under utilisation which wasn't happening till April this year. Otherwise in November itself the utilisation would be 60k plus the billed amount that month but it was only billed amount.)

okay.. if it is EMI on your CC. then it has to be reported .. from principle wise, what they are doing now is correct .

 

[SplendorSuperman]

Hi @SSV
I had an outstanding on one of my CC and rest CCs have negative outstanding.

I used CIBIL simulator to check what would be my projected score if there was no outstanding on any CC , it projected the score to be 802 which was increase of 11 points against 791.

However when today I refreshed my report , all the CCs now have negative balance ( also total) but score jumped only 1 point @ 792.

Views?

 

[SSV]

Hi @SSV
I had an outstanding on one of my CC and rest CCs have negative outstanding.

I used CIBIL simulator to check what would be my projected score if there was no outstanding on any CC , it projected the score to be 802 which was increase of 11 points against 791.

However when today I refreshed my report , all the CCs now have negative balance ( also total) but score jumped only 1 point @ 792.

Views?

You will get 800+ by tomorrow if nothing else changed.. sometimes it takes a day extra…
As I said all other things remaining the same..
Happened to me n number of times

 

[_deb_]

You will get 800+ by tomorrow if nothing else changed.. sometimes it takes a day extra…
As I said all other things remaining the same..
Happened to me n number of times

Each bank will report the data to CIBIL separately as per their process like during month end or after statement generation date. The change in CIBIL score may be delayed.

The simulator is showing me a 20 point jump to a >800 score if I don’t default in anything. Is it reliable?

 

[SSV]

Hi @SSV
I had an outstanding on one of my CC and rest CCs have negative outstanding.

I used CIBIL simulator to check what would be my projected score if there was no outstanding on any CC , it projected the score to be 802 which was increase of 11 points against 791.

However when today I refreshed my report , all the CCs now have negative balance ( also total) but score jumped only 1 point @ 792.

Views?

Each bank will report the data to CIBIL separately as per their process like during month end or after statement generation date. The change in CIBIL score may be delayed.

The simulator is showing me a 20 point jump to a >800 score if I don’t default in anything. Is it reliable?

Guys,
Here is my current Simulator predicoted score when I clear all my blances on all my Credit card accounts. from 784 to 794..
Remind me in 10 to 15 days, when my Infinia card balnce is reported as 0.. this score will make it to 794..
I will share the SS then.. Dont forget. thanks

From CIBIL Web site :




This is the only balance shoiwng some outstanding balance in +ve number.. I have already cleared it.. It will be updated in the first week of August.. remind me. then..

 

[D₹V]

CIBIL Score - A Practical Guide

Discalimer: This is mainly for regular Credt Card users who pay all their dues before due date and wondering why their score is not increasing..
Here we dont discuss the cases where there were defaults and / or delayed payments..that is for another day..​

Ladies and Gentelmen,

Here is the much awaited post on CIBIL Score and how it works and what we should do to improve it over the period of the time..

Here I won't go in detail about how the score is constructed as there were numerous posts on the internet in explaining the CIBIL score in an academic way..
Here we will concentrate more on practical things..

Lets get started..

CIBIL Score's main constituents:

1) Payment History
2) Utilisation
3) Number of Enquiries in the recent past
4) Credit age..
5) Credit Mix

1) Payment History

We should pay all dues before the due date in order to have an excellent score and minimum fainancial burden on us.. This many of us do anyway..

TIP: we should atleast pay Minimum Amount Due( MAD) before the due date atleast - this will safeguard the score,
but will impact us financially if we pay only MAD and leave the rest...

Best practice:
1) Pay MAD immediately after the bill is generated - This will protect the score, in case you failed to pay the full before due date.
2) Pay the full amount due at least 5 days before due date. - ideal case scenario.
3) Pay the full amount even before the bill generations / month end- the best case scenario- will discuss this in detail at the end..

2) Utilisation

There is a notion that if we have <30% overall utilisation then it is good..
Lets dig deep into this..

The prinicple is : the higher the utilisation ratio, the lower the score.. and vice versa ...Period..
So, the aim should be the utilisation ratio should be as minimal as possible. ( it can even go into -ve, this is the best case scenario)..

How this works practically:
It works in range bound basis: like 0 to 10 % , 10 - 20 % and 20 - 30% etc.
Note: these exact range numbers are hypothitical.. trying to explain the logic...
For example: 0- 10% utilisation ratio will have better score than 10- 20% and
10- 20% utilisation ratio will have better score than 20- 30% ratio..

Once it crosses 30% utilisation ratio it will have big negative impact on the score.. hence need to maitain less than 30% ratio to have a decent score.

Tip:
This uitlisation ratio is calculated both on
1) overall basis ( on all accounts together) and
2) Individual account level basis..

Both of the above ratios will have their weightage in the score construction.

Example:
You have 10 accounts with a total of 10 Lakhs sanctioned limit and total utilisation of 2 Lakhs
Here the overall utilisation is: 20%, which is okay as it is under 30%..
But if one of the accounts has 50% utilisation ( ie, one account which has 1L limit and utilsation with 50K).
In this case , score will have big negative impact even though your overall is less than 30%...

BEST practice:

Make sure each and every account utilisation is less than 30% to start with
and as low as possible to have as better score as possible.. ( It can go to negative as well .. this is the best possible scenario)...

3) Number of Enquiries

This is where a lot of people have confusion..

The basic rule:
The longer the credit history , the lesser the impact of number of enquiries on the Credit score...

In practical terms:
Once your credit history crosses the age of 5 years, the no. of enquiries' negative impact diminishes..

Say if you have 6 years of credit history, then 5 or 10 enquireis in the past 1 to 3 months will not have any impact on the score.

If your credit history crosses 10 - 15 years , you can safely forget about the concept of number of enquiries...

TIP:
Even if your credit score is impacted because of no of enquiries, the score will recover pretty fast ie. within 2 to 3 months.
Only people with less than 5 years of credit history should be careful about the no of enquiries..


4) Credit age

The longer the Credit age the better the score and score's stability...
For a person who has a credit age of 15 to 20 years, the fluctuation in his/ her score is very minimal...

Again, after the age of 5 years , the score will get a bit of the boost and started to get stabilised..
Obviously the more older the credit profile the better.
when you are trying to close your oldest credit card account, please check what is the second oldest account's age, if it is more than 5 years, no need to worry..

TIP:
Check score predictor in the offical CIBIL app and predict your score by selecting the oldest card's closure.. this will give a very accurate prediction in my experience.

5) Credit Mix

Obviously, a mix of sceured and unsecured loans is a better indicator rather than having only unsecured loans...

However, what I observed in practice, except for Home loan all other Secured loans have no / minimal postive impact on the score..

Home Loan- will definitely improve your score by around 10 points.
Gold Loan and Loan against FD - have no positive impact on the score in my experience. in fact it had a negative impact as it is carrying some current balances..
Auto Loan - also may not have a positive impact..

Now coming to some other interesting bits:


SSV's Pro Tip:

1) Make current balances <=0 on each and every account as on Reporting Date ..

Maitain 0 or negative current balances on all accounts to get a boost of about 10 points to your score
Then you may ask what is the purpose of having 45 /50 days of free credit period..
Correct. this may not be useful for those who want to utilise full free credit days, but for those who want to boost their credit score for any other purposes temporarily this is one of the great tools which is in our hand..
I will also tell how to get this 0 utlisation along with availing free credit period to some extent for some bank credit cards..

We all know that different banks report balances on different dates.
We classify them as banks reporting balances as on
1) month end
2) bill generation date

The KEY here is current balances as on REPORTING Date ...
This Reproting date can be month end or bill generation date depending upon the bank.

1) For those that report balances as on month end ie.
AXIS, BOB, HDFC, HSBC, IndusInd, IDFC, Kotak, RBL , Stan C, YES ........
For these banks, make sure your due date falls on 1st of every month, so that means, your statement generation datee should be around 14th of every month so that bill DUE date is around 1st or 2nd of the following month...

In this case, you can have your full amount outstanding as on 14 th, but pay the full amount by 30th of every month..
So at the end, your current oustanding balances should <= 0 as on 30th.. this solves the issue.

2) For those banks who report on bill generation date, there is no escape: you have to pay just before bill generation date and make sure bill amount is <= 0,,,


2) HIGH Credit in CIBIL report:

There is one data item called " HIGH credit " in CIBIL report..
what it means : the highest amount used / billed in any credit account during the life time of that account...

This generally doesn't have any direct impact on the credit score except in the cases of charge cards like amex Gold, Platinum cards etc where there is no set sanctioned limit..
This was applicable until recentlty on HDFC cards as well, but HFDC now reports sanctioned limits to credit bureaus..

However, this data item potentially will be useful for lenders to know more about us with regard to
1) Potential high spender
2) giving better credit limits at the time of application..

I am not sure if the Indian lenders are incorporating this in their credit card application evaluation as of now.. I am sure in future they may use this..

How this should work:
Total amount used ie. debited duiring a staetment period should reprorted as HIGH Credit to the bureaus..

Scenario 1:
Take a case of what I generally do:

I have a card with sanctioned limit of 5L and I use it for 2L in one month and pay in full before the bill generation date.
This is how it will be reprted in this case:

Sanctioned Limit: 5L
High Limit : 2L
Current Balance : 0

This stat should WOW a potential lender towards me.. Why?
I am using 40% of sanctioned limit and paying in full back to account before the bill generation.
Means I am a high spender and very obedient in paying back before bill generation date..
and hence they should love to give me their card with generous limits..

Scenario 2:
Take another example of oppostie side:

Sacntioned limit: 5L
High limit :20K
current balance: 20K

In this case, Bank is wasting sanctioned limit on this person, as he is only using 4% of sacntioned limit ..
So , in this case this customer is not a high spender ( hence not much income to the Bank) and there is no point in giving him higher limits as well ..

As per my observation only SBI and Amex is reprortng this HIGH limit correctly in true sense.
(--EDIT: YES bank is also doing the same as per @reach2dpg )
ie.
same example:
spends of 2L , paying full before bill generation:
SBI and AMEX reported
as CL :5L
High Limit 2L and
Curre balance : 0

where as all other banks reported as
CL :5L
High Limit : 0 and
Curr Balance :0..

For other banks to report correct high limit ,we need to have full balance outstanindg as on bill generation date at least for one statement period....

Look at the example of my ICICI account

View attachment 61596

In the above example, my highest bill oustanding duirng one statement period was 2.15 L out of 7.7L sanctioned amount ..and current balance is Zero..
Means I am a good boy. A high spender who pays bills before bill generation.. Banks would love persons like these...

So, with regard to HIGH limit:
My TIP:

Use your card just once for a very big amount and get it reported as HIGH limit , and from then on-wards use as per your normal usage...


This post became too big..but I wanted to share all my knowledge as far as CIBIL score is concerned..

All the best guys...

Have fun
Enjoy.....

Great thread 👏 🧵.

But there are 15-16 spelling error in 'reporting'

Used as 'reproting' or similar.

 

[SSV]

Great thread 👏 🧵.

But there are 15-16 spelling error in 'reporting'

Used as 'reproting' or similar.

Excellent..
Thanks for bringing the spelling mistakes into my notice.
Will rectify them in my free time. or otherwise someone can point out them to me so that I will rectify them..
Cheers

 

[theflash]

CIBIL Score - A Practical Guide

Discalimer: This is mainly for regular Credt Card users who pay all their dues before due date and wondering why their score is not increasing..
Here we dont discuss the cases where there were defaults and / or delayed payments..that is for another day..​

Ladies and Gentelmen,

Here is the much awaited post on CIBIL Score and how it works and what we should do to improve it over the period of the time..

Here I won't go in detail about how the score is constructed as there were numerous posts on the internet in explaining the CIBIL score in an academic way..
Here we will concentrate more on practical things..

Lets get started..

CIBIL Score's main constituents:

1) Payment History
2) Utilisation
3) Number of Enquiries in the recent past
4) Credit age..
5) Credit Mix

1) Payment History

We should pay all dues before the due date in order to have an excellent score and minimum fainancial burden on us.. This many of us do anyway..

TIP: we should atleast pay Minimum Amount Due( MAD) before the due date atleast - this will safeguard the score,
but will impact us financially if we pay only MAD and leave the rest...

Best practice:
1) Pay MAD immediately after the bill is generated - This will protect the score, in case you failed to pay the full before due date.
2) Pay the full amount due at least 5 days before due date. - ideal case scenario.
3) Pay the full amount even before the bill generations / month end- the best case scenario- will discuss this in detail at the end..

2) Utilisation

There is a notion that if we have <30% overall utilisation then it is good..
Lets dig deep into this..

The prinicple is : the higher the utilisation ratio, the lower the score.. and vice versa ...Period..
So, the aim should be the utilisation ratio should be as minimal as possible. ( it can even go into -ve, this is the best case scenario)..

How this works practically:
It works in range bound basis: like 0 to 10 % , 10 - 20 % and 20 - 30% etc.
Note: these exact range numbers are hypothitical.. trying to explain the logic...
For example: 0- 10% utilisation ratio will have better score than 10- 20% and
10- 20% utilisation ratio will have better score than 20- 30% ratio..

Once it crosses 30% utilisation ratio it will have big negative impact on the score.. hence need to maitain less than 30% ratio to have a decent score.

Tip:
This uitlisation ratio is calculated both on
1) overall basis ( on all accounts together) and
2) Individual account level basis..

Both of the above ratios will have their weightage in the score construction.

Example:
You have 10 accounts with a total of 10 Lakhs sanctioned limit and total utilisation of 2 Lakhs
Here the overall utilisation is: 20%, which is okay as it is under 30%..
But if one of the accounts has 50% utilisation ( ie, one account which has 1L limit and utilsation with 50K).
In this case , score will have big negative impact even though your overall is less than 30%...

BEST practice:

Make sure each and every account utilisation is less than 30% to start with
and as low as possible to have as better score as possible.. ( It can go to negative as well .. this is the best possible scenario)...

3) Number of Enquiries

This is where a lot of people have confusion..

The basic rule:
The longer the credit history , the lesser the impact of number of enquiries on the Credit score...

In practical terms:
Once your credit history crosses the age of 5 years, the no. of enquiries' negative impact diminishes..

Say if you have 6 years of credit history, then 5 or 10 enquireis in the past 1 to 3 months will not have any impact on the score.

If your credit history crosses 10 - 15 years , you can safely forget about the concept of number of enquiries...

TIP:
Even if your credit score is impacted because of no of enquiries, the score will recover pretty fast ie. within 2 to 3 months.
Only people with less than 5 years of credit history should be careful about the no of enquiries..


4) Credit age

The longer the Credit age the better the score and score's stability...
For a person who has a credit age of 15 to 20 years, the fluctuation in his/ her score is very minimal...

Again, after the age of 5 years , the score will get a bit of the boost and started to get stabilised..
Obviously the more older the credit profile the better.
when you are trying to close your oldest credit card account, please check what is the second oldest account's age, if it is more than 5 years, no need to worry..

TIP:
Check score predictor in the offical CIBIL app and predict your score by selecting the oldest card's closure.. this will give a very accurate prediction in my experience.

5) Credit Mix

Obviously, a mix of sceured and unsecured loans is a better indicator rather than having only unsecured loans...

However, what I observed in practice, except for Home loan all other Secured loans have no / minimal postive impact on the score..

Home Loan- will definitely improve your score by around 10 points.
Gold Loan and Loan against FD - have no positive impact on the score in my experience. in fact it had a negative impact as it is carrying some current balances..
Auto Loan - also may not have a positive impact..

Now coming to some other interesting bits:


SSV's Pro Tip:

1) Make current balances <=0 on each and every account as on Reporting Date ..

Maitain 0 or negative current balances on all accounts to get a boost of about 10 points to your score
Then you may ask what is the purpose of having 45 /50 days of free credit period..
Correct. this may not be useful for those who want to utilise full free credit days, but for those who want to boost their credit score for any other purposes temporarily this is one of the great tools which is in our hand..
I will also tell how to get this 0 utlisation along with availing free credit period to some extent for some bank credit cards..

We all know that different banks report balances on different dates.
We classify them as banks reporting balances as on
1) month end
2) bill generation date

The KEY here is current balances as on REPORTING Date ...
This Reproting date can be month end or bill generation date depending upon the bank.

1) For those that report balances as on month end ie.
AXIS, BOB, HDFC, HSBC, IndusInd, IDFC, Kotak, RBL , Stan C, YES ........
For these banks, make sure your due date falls on 1st of every month, so that means, your statement generation datee should be around 14th of every month so that bill DUE date is around 1st or 2nd of the following month...

In this case, you can have your full amount outstanding as on 14 th, but pay the full amount by 30th of every month..
So at the end, your current oustanding balances should <= 0 as on 30th.. this solves the issue.

2) For those banks who report on bill generation date, there is no escape: you have to pay just before bill generation date and make sure bill amount is <= 0,,,


2) HIGH Credit in CIBIL report:

There is one data item called " HIGH credit " in CIBIL report..
what it means : the highest amount used / billed in any credit account during the life time of that account...

This generally doesn't have any direct impact on the credit score except in the cases of charge cards like amex Gold, Platinum cards etc where there is no set sanctioned limit..
This was applicable until recentlty on HDFC cards as well, but HFDC now reports sanctioned limits to credit bureaus..

However, this data item potentially will be useful for lenders to know more about us with regard to
1) Potential high spender
2) giving better credit limits at the time of application..

I am not sure if the Indian lenders are incorporating this in their credit card application evaluation as of now.. I am sure in future they may use this..

How this should work:
Total amount used ie. debited duiring a staetment period should reprorted as HIGH Credit to the bureaus..

Scenario 1:
Take a case of what I generally do:

I have a card with sanctioned limit of 5L and I use it for 2L in one month and pay in full before the bill generation date.
This is how it will be reprted in this case:

Sanctioned Limit: 5L
High Limit : 2L
Current Balance : 0

This stat should WOW a potential lender towards me.. Why?
I am using 40% of sanctioned limit and paying in full back to account before the bill generation.
Means I am a high spender and very obedient in paying back before bill generation date..
and hence they should love to give me their card with generous limits..

Scenario 2:
Take another example of oppostie side:

Sacntioned limit: 5L
High limit :20K
current balance: 20K

In this case, Bank is wasting sanctioned limit on this person, as he is only using 4% of sacntioned limit ..
So , in this case this customer is not a high spender ( hence not much income to the Bank) and there is no point in giving him higher limits as well ..

As per my observation only SBI and Amex is reprortng this HIGH limit correctly in true sense.
(--EDIT: YES bank is also doing the same as per @reach2dpg )
ie.
same example:
spends of 2L , paying full before bill generation:
SBI and AMEX reported
as CL :5L
High Limit 2L and
Curre balance : 0

where as all other banks reported as
CL :5L
High Limit : 0 and
Curr Balance :0..

For other banks to report correct high limit ,we need to have full balance outstanindg as on bill generation date at least for one statement period....

Look at the example of my ICICI account

View attachment 61596

In the above example, my highest bill oustanding duirng one statement period was 2.15 L out of 7.7L sanctioned amount ..and current balance is Zero..
Means I am a good boy. A high spender who pays bills before bill generation.. Banks would love persons like these...

So, with regard to HIGH limit:
My TIP:

Use your card just once for a very big amount and get it reported as HIGH limit , and from then on-wards use as per your normal usage...


This post became too big..but I wanted to share all my knowledge as far as CIBIL score is concerned..

All the best guys...

Have fun
Enjoy.....

Could you explain about overleveraged means whats the ratio for bank considering me overleveraged...

 

[SSV]

Could you explain about overleveraged means whats the ratio for bank considering me overleveraged...

different banks do consider different ratio value depending how they see overleveraged is sensitive to their business

in simple terms, your total CLs on all CCs / total annual income., generally anything above 2 is considered as overleveraged.