Importance of CIBIL Score
Published on: 11 Oct 2024
Many factors affect your eligibility for a home loan. The factors normally include - loan type, loan terms, down payment, annual income, etc., but today we will see why the CIBIL score is one of the most important factors for your home loan.
What is a CIBIL score?
CIBIL is a prominent credit score offered by the Credit Bureau TransUnion CIBIL, one of India's most trustworthy credit bureaus. Credit Information Bureau (India) Limited (CIBIL) is authorised by the RBI to keep the credit record of every citizen of India. Due to credit scores like CRIF HighMark, financial institutions having ties with the bureau, a CIBIL score is generally considered to be of high importance, so much so that usually the lenders prefer a CIBIL score over other valid credit scores.
Most CIBIL scores range from 300 to 900, and 900 is the highest possible score and is made up of 30% of your payment history, 25% of credit exposure, 25% of credit duration and time and 20% constitutes the other factors.
But why is the CIBIL score important?
CIBIL collects the data from various financial institutions then a report is created to highlight every individual's credit history based on the analysis made. They are then given a 3-digit number, which will be your CIBIL score. This CIBIL report consists of your present and past credit transactions.
The score is categorised as follows:
- 750-900 is considered a very high and excellent score
- 700 - 749 is a good credit score
- 650- 699 is a fair score
- 600- 649 is a doubtful score
- 600 is a very low score and may affect your eligibility for a home loan
Why to achieve a favourable CIBIL score?
CIBIL score judges your ability to pay a home loan back. It shows how worthy and capable you are of paying your EMIs per the schedule. A lender will check your CIBIL score to ensure you can be lent and may also give good offers for loans to you as a borrower. A person with a low CIBIL score might also get the loan, but financial institutions may charge higher interest rates and insurance costs even with an average credit score.
Proof of Credibility
We know that the CIBIL score gives proof of your credibility and a lender forms an immediate judgement of how capable a person is when it comes to repayments. So, when the lender or any institution receives your loan application with a high credit score, it automatically gives proof of your credibility that has already been verified, making the process of getting a home loan way smoother.
Interest rate
If your CIBIL score is high, you can choose for yourself and control your loan repayment, which is a great advantage. A borrower with a strong CIBIL score can order a personal loan interest rate of choice and pick from a variety of lenders who offer a loan that fits them as they have no limitations. The personal loan interest can affect the repayment tenure significantly. Having control over your loan repayment can help you meet your deadline on time every month while also enabling you to plan your finances better. And in return, repaying a loan within time will boost your credit score.
Loan amount
One of the reasons why it's good to have a CIBIL score above 700 is that the better your credit score, the higher the amount of loan that will get approved. Sometimes the loan amount is high and gets rejected just because of your credit score, but it solves all the problems if you have a great CIBIL score. A good CIBIL score ensures that your loan gets approved with minimal documentation.
Few more advantages of having a good credit score:
- Credit card approval: Your credit card can only get approved when you have a decent CIBIL score because if you defaulted on your credit card before, it would also show on your CIBIL score.
- Furniture rental companies check credit scores before offering the price to potential customers.
- Many societies and landlords check credit scores before agreeing to rent a space.
- Many organisations also do a credit check before hiring candidates.
To sum it all up, A CIBIL score reflects your credit score and history of transactions that took place; it automatically becomes proof of your worthiness, capability and credibility. There are many advantages if you have a good CIBIL score, as your CIBIL score affects your interest rate, home loan eligibility and loan amount. This score is an important factor when it comes to a home loan!
For more such helpful content, stay in tune with EstateMint blogs. Follow us on social media for more such helpful tips & advice.
Comments Add Comment
EstateMint is one of the leading Real Estate, and finance consulting firm having its operations in Pune. EstateMint’s strength is based on years of expertise in Real Estate and Digital Marketing with their cutting edge technology platforms and research tools which deliver the rich knowledge in the field of Real Estate and empower customers to make informed decisions.
© Ceyone Technologies LLP 2023.
All rights reserved.
Ceyone Technologies LLP RERA Registration Number: A52100012743
Search, Compare, Buy!
Don’t have an account?
Search, Compare, Buy!
EstateMint, Office No. 301 & 302, Sanghvi Upsurge, Old Mumbai Road, near B. U. Bhandari Mercedes Benz Showroom, Baner, Pune, Maharashtra 411045
FOLLOW US ON
Are you sure you want to clear the comparison?
