If you have ever applied for a loan or a credit card, you have probably heard the term CIBIL score. It is a three-digit number that plays a big role in whether your loan gets approved and at what interest rate.

But what exactly is it? How is it calculated? And if you take a loan against mutual funds, does it affect your CIBIL score?

Let us answer all of these questions.

What is a CIBIL Score?

CIBIL stands for Credit Information Bureau (India) Limited, now officially known as TransUnion CIBIL. It is one of four credit bureaus in India (the others being Experian, Equifax, and CRIF Highmark).

Your CIBIL score is a number between 300 and 900 that represents your creditworthiness — how likely you are to repay a loan based on your past financial behaviour.

• 750 and above: Excellent — most loan applications get approved easily
• 700 to 749: Good — eligible for most loans, may get slightly higher rates
• 650 to 699: Fair — approval is possible but not guaranteed
• Below 650: Poor — loan applications are likely to be rejected or come with high interest rates

Most banks and lenders check your CIBIL score (or a score from another bureau) before approving any loan or credit card application.

How is the CIBIL Score Calculated?

Your CIBIL score is based on your credit history — a record of how you have handled credit in the past. The main factors that influence it are:

1. Payment History (35%)

This is the most important factor. It looks at whether you have paid your EMIs, credit card bills, and other dues on time.

• On-time payments improve your score
• Late payments, defaults, and settlements damage your score

2. Credit Utilisation (30%)

This measures how much of your available credit you are using. If you have a credit card with a ₹5 lakh limit and you consistently use ₹4 lakh, your utilisation is 80% — which is considered high.

• Keeping utilisation below 30% is ideal
• High utilisation signals that you may be financially stretched

3. Credit History Length (15%)

Longer credit history is better. If you have been managing credit responsibly for 10 years, it carries more weight than a 1-year history.

4. Credit Mix (10%)

Having a mix of different credit types (home loan, car loan, credit card, personal loan) shows that you can handle various kinds of credit. An all-credit-card profile with no other loans may score slightly lower.

5. New Credit Enquiries (10%)

Every time you apply for a loan or credit card, the lender checks your credit report. Too many enquiries in a short period can lower your score, as it suggests you may be desperately seeking credit.

Does Loan Against Mutual Funds Affect Your CIBIL Score?

Yes — like any loan, a loan against mutual funds (LAMF) appears on your credit report. But the impact can be positive, neutral, or negative, depending on how you manage it.

Positive Impact

• Timely repayment: If you repay the loan on time, it adds a positive entry to your credit history
• Secured loan credit mix: Having a secured loan (LAMF) alongside unsecured debt (credit cards) improves your credit mix
• Lower utilisation: If you use LAMF instead of maxing out credit cards for emergency needs, your credit card utilisation stays low — which helps your score

Neutral Impact

• Simply having the loan: A loan against mutual funds, by itself, neither significantly helps nor hurts your score. It is one entry among many in your credit history

Negative Impact

• Missed payments or default: If you fail to make interest payments on time, it will negatively affect your score — just like any other loan
• Multiple loan applications: If you apply for LAMF at several places in a short period, the multiple hard enquiries may cause a small temporary dip

LAMF vs Personal Loan: Impact on CIBIL Score

Both types of loans appear on your credit report, but there are differences:

From a credit score perspective, a secured loan is generally viewed more favourably than an unsecured loan. Taking a LAMF instead of a personal loan can be a slightly better choice for your credit profile, all else being equal.

How to Check Your CIBIL Score

You can check your CIBIL score for free once a year through the official TransUnion CIBIL website. Many banks and financial apps also offer free credit score checks.

Checking your own score is a soft enquiry and does not affect your score. Only hard enquiries (when a lender checks your score for a loan application) have an impact.

Tips to Maintain a Good CIBIL Score

1. Pay all EMIs and credit card bills on time — This is the single most important factor
2. Keep credit card utilisation below 30% — Do not max out your cards
3. Do not apply for too many loans at once — Space out applications
4. Maintain a healthy credit mix — A combination of secured and unsecured credit is ideal
5. Do not close old credit cards — Length of credit history matters; keep older cards active with occasional small purchases
6. Check your credit report annually — Look for errors or unauthorised accounts and dispute them immediately

Key Takeaways

• Your CIBIL score is a number between 300 and 900 that reflects your creditworthiness
• It is based on payment history, credit utilisation, history length, credit mix, and new enquiries
• A loan against mutual funds appears on your credit report like any other loan
• Timely repayment of LAMF can improve your score; default will hurt it
• LAMF is a secured loan, which is generally viewed more favourably than unsecured debt
• Using LAMF instead of maxing out credit cards for emergencies can actually help your utilisation ratio
• Always repay on time and monitor your credit report regularly

Your CIBIL score is a long-term asset. Whether you take a loan against mutual funds, a personal loan, or use a credit card — the key to a healthy score is consistent, responsible repayment behaviour.