CIBIL Score is really important not only for home loan but for any loan. By analyzing the score banks give loans. What is CIBIL Score? A CIBIL score is a three-digit number ranging from 300 to 900 that represents your creditworthiness. It is calculated by the Credit Information Bureau (India) Limited (CIBIL) based on your credit history and repayment behavior. A 750 or above score is considered a good credit score and below 500 consider a bad credit score. If your credit score is above 750 you will like to get a loan easily but below 500 will not be acceptable by any bank. According to a source from LiveMint the average credit score of Indians was 715 in FY22.
| Credit Score | Review |
|---|---|
| 420 | Poor category (Very difficult to get a loan) |
| 630 | Fair Category |
| 690 | Good Category |
| 770 | Very good Category |
So, before understanding how CIBIl Score is calculated in home loan you need to understand a few things. Let’s get started!
The CIBIL score is determined by several factors, each contributing a specific percentage to the final score. Here are the main components:
Let's break these down further.
Your credit history is a detailed record of all the loans you've taken out and credit cards you've used in the past. It gives as a reflection of your financial behavior, particularly how reliably you've repaid your debts over time. When you consistently make timely repayments on your loans and credit card bills, it shows to lenders that you are a responsible borrower. This positive behavior typically leads to an increase in your credit score, which is a numerical representation of your creditworthiness.
Credit utilization refers to how much of your available credit you are currently using. It's calculated by dividing your credit card balance by your credit limit. For example, if you have a credit card with a ₹50,000 limit and you have a balance of ₹15,000, your credit utilization rate would be 30%.
Maintaining a credit utilization rate below 30% is generally seen as good practice for building and maintaining a healthy credit score. Higher utilization rates can indicate to lenders that you may be overextended financially, which could negatively affect your creditworthiness. Therefore, keeping your credit card balances relatively low compared to your credit limits can have a positive impact on your credit score over time.
Maintaining a balanced mix of secured and unsecured credit is advantageous for your credit profile. Secured credit includes loans backed by collateral like home loans or auto loans, while unsecured credit comprises credit cards and personal loans without collateral. Having both types demonstrates responsible credit management and can positively influence your creditworthiness. Lenders see a diverse credit portfolio as a sign that you can handle different types of credit responsibly, which may improve your overall credit score and borrowing opportunities.
Each time you apply for credit, lenders conduct a hard inquiry into your credit report. These inquiries are recorded and visible to other lenders. If there are frequent inquiries within a short period, it can lower your credit score. This is because multiple inquiries may indicate to lenders that you are actively seeking credit and could potentially be overextending yourself financially. It's important to be mindful of how often you apply for credit, as each inquiry can have a temporary impact on your credit score.
Hard enquiry happens when you are applying for multiple loans at the same time. This will perceive a risk to lenders as they will see you are not responsible towards loans. It will lower the credit score also.
Whereas, soft enquiry means you are checking the CIBIL score for your personal understanding or evaluation. This will not lower the credit score.
Your credit history shows how punctually you've paid back debts. Making payments on time consistently helps raise your credit score. Conversely, defaults or late payments can significantly lower your score. Essentially, your credit history is a track record that lenders use to assess your reliability in managing credit and financial obligations. It's crucial to maintain a positive history by ensuring all payments are made on time, as this can greatly influence your ability to secure future credit and favorable interest rates.
Data Collection: CIBIL collects your credit information from banks and financial institutions.
Data Segregation: The information is segregated into different components like payment history, credit utilization, etc.
Weightage Assignment: Each component is assigned a weightage based on its importance like we discuss in the previous section.
Score Calculation: The weighted values are summed up to generate your CIBIL score.
Visit https://www.cibil.com/ Official page
Go to the free CIBIL Score section in that page
Fill the details and attach PAN, Aadhar or any document as needed
System will generate an OTP
After successfully fill OTP go to the dashboard and create user ID and password and login
Check the CIBIL report
Having a high CIBIL score is really important when you want to get a home loan with good terms in India. You can improve your score by doing things like paying your bills on time, using less of your available credit, and having different types of credit. It's also smart to check your credit report often to make sure everything is correct. These steps can make it more likely for banks to approve your loan application.
How can EazyBankLoan help you in taking a loan? We understand the process of procuring a loan can be stressful. That is why we take care of your Loan application process, saving you time and hassle by handling the paperwork and communication with the loan providers.
A CIBIL score above 750 is considered good for home loan approval.
It's advisable to check your CIBIL score at least once a year or before applying for a loan.
While it's possible, a low CIBIL score may result in higher interest rates or stringent loan terms.
No, checking your own CIBIL score is considered a soft inquiry and does not affect your score.
It can take several months to a year to see significant improvement in your CIBIL score, depending on your credit behavior.
No List Founds!
Your email address will not be published. Required fields are marked *
