Credit Scores and loans go hand in hand. If you want to get a loan, you need a good credit score. A good credit score not only helps you get a loan, it helps you get lower interest rates on your loan, and it helps you get the loan that you need, when you need it.
Credit scores are determined by your credit history. They take into account all your past loan matters. Your debt-to-income ratio, outstanding loan amounts, and your repayment history are all taken into account. So it is vital to understand how CIBIL™ score works and how to get the best CIBIL™ score.
What Is A CIBIL™ Score?
CIBIL™, or Credit Information Bureau India Ltd, is India’s first credit information bureau. It was founded in the early 2000s and is one of India’s four major credit bureaus.
Experian, Equifax, and High Mark were soon followed by other credit rating agencies.
CIBIL™ is a credit bureau that collects and stores information about individual customers. It tracks, records, and stores information about debtors’ loans and credit cards.
On a monthly basis, banks and other lenders send records to CIBIL™, which are used to generate a score for each individual. This is known as a CIBIL™ Score.
What Is The Role Of CIBIL™ In Getting A Home Loan?
Your CIBIL™ score is the numeric measure of your credit worthiness. It is based on the amount of credit you have access to and your repayment history. It represents your trustworthiness, and your ability to repay your debts on time.
A CIBIL™ score provides information on your credit worthiness, tax history, etc. It refers to a credit score, which is a number between 300 and 900 that indicates how likely you are to pay your loan if you are late.
The idea behind a CIBIL™ score is simple. It is used to measure your risk of defaulting on your loans and credit card debt.
Your CIBIL™ Score helps lenders make decisions about whether to approve or deny your application for a loan.
What Does A High CIBIL™ Score Mean For My Home Loan Approval?
If you have a good credit score, you can get lower interest rates on your loans. And your chances of getting approved for a credit card increase due to a higher credit score.
A high CIBIL™ score also increases your chances of getting a better interest rate and a lower annual percentage rate on your credit card.
Lenders generally look at a credit score of 700 and higher to approve your home loan faster.
Can I Get A Home Loan With A CIBIL™ Score Of 650?
Yes, you can, but the interest rate and other terms will be unfavorable. This may lead to a heavy interest burden on your home loan. It is wise to improve your CIBIL™ score a few notches and then apply for the home loan.
What Are Some Factors Affecting My CIBIL™ Score?
Payment History –
A spotless payment history shows that you are a reliable creditor. Your credit utilization ratio is the amount of credit you use in relation to your total credit limit.
To maintain a good credit score, experts recommend that you keep your credit utilization at 30%. Borrowers are more likely to default due to their high credit exposure.
Credit Utilization Ratio –
Experts recommend that you keep your credit utilization ratio at 30% to maintain a good credit score.
Lenders dislike credit utilization rates of more than 50%. Because of their high credit exposure, lenders face a higher default risk.
The credit utilization ratio measures how much credit you use in relation to your total credit limit.
A Healthy Credit Mix –
Multiple credit accounts demonstrate to lenders that you can manage multiple types of debt at the same time. It also assists individuals in gaining a better understanding of their financial situation and debt repayment capacity.
One of the most common criteria used to compute credit ratings is credit mix, or the diversity of your credit accounts. A home loan, car loan, and a credit card are examples of multiple credit accounts.
Multiple Hard Credit Checks –
A high number of hard inquiries on your CIBIL™ report will have a negative impact on your CIBIL™ score.
It shows that you are desperate for credit, making you a high-risk borrower. When you use more credit, you incur more debt, and your credit score suffers as a result.
Length of your credit history
Creditors are convinced that you are good at debt management if you have a long credit history, which increases your credit score. Your oldest credit account determines your credit score.
How To Improve My CIBIL™ Score Immediately?
Maintaining a healthy credit score requires disciplined credit management. Though you cannot improve your credit score overnight, following these steps will have a significant impact on your CIBIL™TM score.
A reasonable time to restore your credit score is 4-12 months. You only need patience, commitment, and self-discipline to reach your credit goal.
Here are a few tips to improve your CIBIL™ score:
- Close down any long standing loans or credit cards
- Check your CIBIL™ credit report regularly
- Do not default on payments
- Avoid multiple loan/ credit card applications
- Request for an increase in your credit card credit limit
- Pay attention to your joint applicant’s credit card spending habits
Also Read: How to Increase Bajaj EMI Card Limit Online Using Customer Portal – Experia? – TechWeblyTechWebly
Conclusion
The CIBIL™ Score is a vital component of your home loan approval process. Improving your CIBIL™ score is essential to your home loan application. It demonstrates that you are a responsible borrower.
A high CIBIL™ score also increases your chances of getting a better interest rate and a lower annual percentage rate on your home loan.
Keep your CIBIL™ score high by making on-time payments and paying your bills on time.
Regularly check your CIBIL™ score and take steps to improve it if needed. A few notches higher will increase your chances of getting a better interest rate and a lower annual percentage rate on your home loan.
