In India, credit scores are typically calculated by credit bureaus using specific algorithms that take into account various financial factors. The most commonly used credit score in India is the CIBIL (Credit Information Bureau India Limited) score. Here are the key factors that influence the calculation of a credit score in India:

1. Payment History (35% Weightage):

   • Timely payment of credit card bills, loan EMIs, and other outstanding debts is the most significant factor affecting your credit score. Consistent on-time payments have a positive impact on your score, while late payments, defaults, and bankruptcies can lower it.

2. Credit Utilization (30% Weightage):

   • Credit utilization refers to the ratio of your current credit card balances to your credit limit. Maintaining a low credit utilization ratio (preferably below 30%) is seen as responsible credit management and positively affects your credit score.

3. Credit History Length (15% Weightage):

   • The length of your credit history is considered in the calculation. A longer credit history is generally viewed more favorably, as it provides a more comprehensive picture of your credit behavior over time.

4. Credit Mix (10% Weightage):

   • Having a diverse mix of credit accounts, such as credit cards, personal loans, and auto loans, can positively impact your credit score. However, it's important to manage these accounts responsibly.

5. New Credit (10% Weightage):

   • Opening multiple new credit accounts in a short period can be seen as a sign of financial stress and may negatively impact your credit score. Each new credit application results in a hard inquiry on your credit report.

6. Other Factors:

   • Other factors that may influence your credit score include the total amount of outstanding debt, the types of credit used, and any defaults, settlements, or legal issues related to your credit history.

It's important to note that different credit bureaus may use slightly different algorithms and weightage for these factors. Therefore, your credit score may vary slightly depending on the bureau providing the score.

Credit scores in India typically range from 300 to 900, with a higher score indicating better creditworthiness. Lenders often use these scores to assess the risk of lending to an individual. A higher credit score increases the likelihood of loan approval and may also result in more favorable interest rates and terms.

To maintain and improve your credit score in India, focus on making timely payments, managing your credit responsibly, and regularly monitoring your credit report for accuracy. If you notice any errors, contact the credit bureau to have them corrected.