In India’s formal lending ecosystem, a CIBIL score is not just a number—it is a credit risk indicator used by banks, NBFCs, and financial institutions to assess borrower reliability. Almost every loan or credit card application today passes through a credit bureau check before it reaches income assessment or internal approval stages.
Despite its importance, most borrowers understand CIBIL only at a surface level. This article explains the complete lifecycle of a CIBIL score—how it is generated, updated, corrected, and used by lenders—based on real-world banking and credit operations.
Table of Contents
What Is a CIBIL Score?
A CIBIL score is a three-digit numeric summary of your credit behaviour, ranging from 300 to 900. It reflects how responsibly you have handled loans and credit cards over time.
- High scores (750 and above): Indicate disciplined repayment behaviour and financial reliability
- Lower scores: Suggest higher credit risk due to late payments, defaults, or excessive borrowing
If you have no prior credit history, your profile may be marked as New to Credit (NTC). In such cases, lenders do not yet have enough data to predict repayment behaviour.
Banks use the CIBIL score as an initial risk filter, not as the sole approval criterion.
Who Generates the CIBIL Score in India?
In India, CIBIL scores are generated by TransUnion CIBIL, an RBI-licensed Credit Information Company (CIC).
Banks, NBFCs, housing finance companies, and credit card issuers regularly submit borrower data to CIBIL, including:
- EMI repayment status
- outstanding balances
- credit limits
- overdue amounts
- write-offs and settlements
CIBIL consolidates this information into a credit report and derives the associated score. check EMI affordability calculation
Other Credit Information Companies (CICs) in India
Apart from TransUnion CIBIL, India has three other RBI-authorized credit bureaus:
- Equifax India – Used by select banks and NBFCs
- Experian India – Popular with fintech and digital lenders
- CRIF High Mark – Strong presence in NBFC and microfinance segments
Each CIC works independently. This is why a borrower’s score may differ slightly across bureaus, depending on where lenders report data.
How CIBIL Score Is Calculated
CIBIL calculates scores using multiple long-term credit behavior factors.
Repayment History
This has the highest weightage. Even a single delayed payment can impact the score disproportionately.
Credit Utilisation Ratio
High utilization—especially on credit cards—signals financial stress.
Length of Credit History
Older, well-maintained accounts improve score stability.
Credit Mix
A balanced mix of secured and unsecured loans is viewed positively.
Recent Credit Enquiries
Multiple loan or card applications within a short period reduce the score.
For a deeper understanding of how banks combine these factors, refer to
👉 How Banks Decide Loan Eligibility in India
Soft Inquiries vs. Hard Enquiries
Soft Enquiry
Occurs when:
- you check your own credit score
- lenders run internal pre-checks
Soft inquiries do not impact your score.
Hard Enquiry
Occurs when:
- you formally apply for a loan or credit card and are checked by a bank/NBFC/FI.
Multiple hard enquiries in a short span negatively affect your score and may also trigger rejection logic.
👉 Why Banks Reject Loan Applications in India
How Often Is CIBIL Data Updated?
Most banks and NBFCs report data to CIBIL every 15 to 30 days.
This means:
- EMI payments reflect with a delay
- loan closures take time to appear
- overdue amounts may continue temporarily
CIBIL score changes are never real-time; Even a one-day delay in payment can still impact the score until corrected in the next reporting cycle.
How to Check Your CIBIL Score
Free Access
CIBIL allows one free credit report per year through its official portal.
Paid Subscription
Annual paid plans offer:
- frequent score updates
- credit monitoring alerts
Paying for a subscription does not improve your score—it only improves visibility.Read a detailed guide on why CIBIL score drops suddenly?
Why CIBIL Score Is Important for Loans and Credit Cards
A good CIBIL score:
- improves approval probability
- helps negotiate interest rates
- influences credit limits and tenure
However, lenders also assess:
- income stability
- employer profile
- FOIR and existing EMIs
This is why approval is possible even below 750—and rejection is possible even above it. FOIR (Fixed Obligations to Income Ratio) is also one of the key paramter for loan approval.
👉 Minimum CIBIL Score Required for Different Loans
How to correct CIBIL report
Errors in CIBIL reports are more common than people think. These include:
- closed loans shown as active
- overdue amounts after full payment
- duplicate accounts
- incorrect ownership
Step 1: Identify the Exact Error
Download your credit report and note:
- account number
- lender name
- incorrect entry
Step 2: Raise a Dispute with CIBIL
Log in to CIBIL’s portal and raise an online dispute against the specific account.
⚠️ Important:
CIBIL does not correct data on its own. It only forwards disputes.
Step 3: Lender Verification
CIBIL sends the dispute to the concerned bank or NBFC for confirmation.
Step 4: Correction and Update
Once the lender confirms, the corrected data is reflected in the next reporting cycle (15–30 days).
How to Approach the Bank After Paying Pending Dues
Many borrowers assume that once dues are paid, CIBIL updates automatically. This is often false.
Correct Process After Clearing Dues:
- Contact the bank/NBFC directly (branch or customer care)
- Request:
- loan closure letter or
- no-dues certificate
- Ask the lender to explicitly update CIBIL records
- Follow up until the update reflects
⚠️ Key Rule:
CIBIL cannot change records unless the lender confirms the update.
If this step is skipped, overdues may continue to appear despite payment.
How Loan Settlement Can Impact CIBIL Score (Bhola Ram’s Case)
Bhola Ram, a salaried individual, had an outstanding loan with a financial institution. At one stage, due to personal financial difficulty, he was unable to continue regular repayments. At that time, his loan account showed a principal outstanding of ₹100 and interest outstanding of ₹15.
Bhola Ram visited the bank branch to discuss closure of the loan. The bank offered him a One-Time Settlement (OTS) scheme, under which he was asked to pay only the principal amount of ₹100. The bank informed him that the remaining interest of ₹15 would be waived. Believing this to be a normal loan closure, Bhola Ram accepted the offer, paid ₹100 at the branch, and received a loan closure letter.
For Bhola Ram, the matter appeared closed.
However, after three to four months, when Bhola Ram approached a retail store to purchase a mobile phone on EMI, his loan application was rejected. On checking his credit report, he was shocked to find that his CIBIL score had dropped sharply. The loan account was marked as “settled / written off”, not as a normal closure.
Confused, Bhola Ram again visited the bank branch and met the bank official. He explained that he had paid the loan amount as advised and believed the account was closed properly. The bank then clarified that under a One-Time Settlement, even if the principal is fully paid, the account is reported to credit bureaus as a settlement, which negatively impacts the CIBIL score.
The bank further informed Bhola Ram that there was a possible corrective path. If he paid the remaining interest amount of ₹15, the bank could treat the loan as a full repayment instead of a settlement. Based on this, the bank could update the credit information company (CIC) to reclassify the account as a normal loan closure.
Bhola Ram agreed, paid the remaining ₹15 at the branch, and obtained a fresh confirmation of full repayment. The bank then raised a request with the credit bureau to update the loan status from “settled” to “closed”.
In the subsequent credit reporting cycle, the updated status reflected in Bhola Ram’s credit report. Over time, as the settlement remark was removed, his CIBIL score gradually improved.
Key Learning from This Example
- A One-Time Settlement is not the same as a normal loan closure
- Settlement entries can significantly reduce CIBIL score
- Credit bureaus update data only after confirmation from the lender
- Paying pending dues and ensuring correct reporting can help repair credit history
Can a Damaged CIBIL Score Be Improved?
Yes—but only through discipline and time:
- timely EMI payments
- reduced credit card utilisation
- minimal loan enquiries
- keeping older accounts active
There are no instant fixes.
👉 Please read ,How to Improve CIBIL Score from 600 to 750 to understand ithe innerpsychology of CIBIL.
Final Thoughts
A CIBIL score is a behavioral mirror of your credit history, not a permanent judgment. Understanding how credit bureaus work—and more importantly, how banks interact with them—allows borrowers to correct mistakes, rebuild trust, and access better financial opportunities.
For Indian borrowers, awareness and discipline matter more than numbers alone.
Frequently Asked Questions (FAQs)
1. Is a CIBIL score the same as a credit score?
In India, a CIBIL score is commonly referred to as a credit score, but technically it is the score generated by TransUnion CIBIL. Other credit bureaus like Experian, Equifax, and CRIF also generate credit scores using their own models.
2. Does a high CIBIL score guarantee loan approval?
No. A high CIBIL score improves approval chances but does not guarantee approval. Banks also evaluate income stability, existing EMIs, FOIR, employer profile, and internal risk policies before approving a loan.
3. How long does a late payment affect my CIBIL score?
A late payment can impact your CIBIL score for several months. Repeated delays have a stronger negative effect, while timely repayments over time help gradually improve the score.
4. Why is my CIBIL score different from my Experian or Equifax score?
Each credit bureau receives data from different lenders and uses its own scoring algorithm. Due to reporting differences and calculation models, scores may vary slightly across bureaus.
5. How much time does it take for a CIBIL score to improve after paying dues?
After clearing dues, improvements generally reflect in 30–45 days, depending on when the lender reports updated data. Significant improvement takes consistent on-time payments over several months.
6. Can I remove a genuine default from my CIBIL report?
No. Genuine defaults cannot be removed from the credit report. They remain part of your credit history, but their impact reduces over time with disciplined repayment behavior.
7. Does closing old loans or credit cards improve CIBIL scores?
Closing unnecessary or high-interest loans may help control risk, but closing old, well-managed accounts can reduce the length of credit history. Decisions should be taken carefully.
8. Can settlement of a loan affect my CIBIL score?
Yes. Loan settlements (where partial payment is accepted) negatively impact CIBIL scores and remain visible in the credit report. Full repayment is always better for credit health.
9. How many credit inquiries are considered safe?
There is no fixed number, but multiple loan or credit card applications within a short period can lower the score. It is advisable to apply only when genuinely required.
10. What should I do if my bank does not update CIBIL after payment?
You should follow up with the bank or NBFC, request written confirmation of payment or closure, and ask them to update CIBIL records. CIBIL can update data only after lender confirmation.