CIBIL score is a term that we come across quite regularly in banking and business credit dealings. The origin of the term comes from credit score which is an indispensable element of an individual or an organization’s dealings with banks and credit card companies. Having a high CIBIL score is extremely important in order to get a Bajaj Finserv home loan approved. So for the benefit of people who are freshmen in the financial arena, here is an article that will demonstrate all that there is to know about credit scores, and in particular, CIBIL score.
What is a credit score and CIBIL score?
A credit score is a based on the analysis of a person’s credit files. A credit score is primarily based on credit report information typically collected from credit bureaus. Lenders, such as banks and credit card companies, use credit scores to evaluate the potential dangers posed by lending money to consumers and to prevent losses due to bad debt. They also use credit scores to work out which applicants qualify for a loan, at what interest rate, and what credit limits. CIBIL is the most prominent of the six Credit Bureaus in India registered under SEBI, and if you are applying for Credit Cards in India, the credit score calculated by CIBIL, known as CIBIL score, will help you get a better deal. CIBIL Transunion Score is a 3 digit number which represents your credit history. This score is calculated on the basis of your credit report that contains your credit history and analysis on it carried out by the credit bureau.
To keep a perfect score you should also be aware if name change affect CIBIL Score
How is a CIBIL score calculated?
The basis of calculating CIBIL score is the credit history. The credit bureau collects all the credit information about an individual in one report to calculate the CIBIL score. Some of the factors that are instrumental in calculating the credit score are:
The credit history is given highest weight while calculating the credit score. How an individual has serviced his/her past debt obligations has a weight of 30% in credit score calculation.
The total amount of outstanding credit will decide another 25% of the credit score.
Rest of the factors like credit utilization, recent credit behaviour will contribute the rest 20% of the credit score.
How does CIBIL score affect your home loan process?
A few common mistakes that could be hampering your chances of securing a home loan:-
- A home loan is a great financial instrument that can help you purchase your dream home. When applying for a home loan, make sure that you have a good CIBIL score. CIBIL scores play an important role in the approval of your home loan. Let us have a look at how CIBIL score can affect your home loan process.
- A poor CIBIL score reduces your chances of availing the home loan in a hassle-free manner. On the other hand, if you have a good CIBIL score, lenders may consider you a responsible borrower and approve your home loan application quickly.
- Moreover, a good credit score will allow you to negotiate on various fees and charges involved in the home loan sanctioning processes.
- A good credit score will help you get the best possible interest rates and terms. Since a home loan is a long term financial liability, a competitive interest rate can help you save a large amount of money in the long run.
- You can also avail home loan insurance products at low premiums if you have a high CIBIL score.
- Now that you are well aware of the importance of having a high CIBIL score, let’s have a look at a few common mistakes that could hamper your chances of securing a home loan.
Not checking CIBIL score before applying for a home loan.
- Having outstanding dues in the form of unsecured personal loans, credit card loans, etc.
- Multiple loan applications despite having a poor credit score.
- By avoiding the above-mentioned mistakes, you can enhance the chances of your home loan approval. It is essential that you check CIBIL score beforehand. This will reduce the rejection chances of your home loan application.
Get to know reasons to check your CIBIL Score Regularly.
Benefits of a high CIBIL score when applying for a home loan
To Get home Loan Approvals
Once you apply for a home loan, the lender will check your credit history before giving you the credit. If you have got a high credit score, the lender will consider lending you “Credit Safe” and your home loan application will be accepted after evaluating your repayment capabilities. But if you have a low credit score your home loan application will be rejected immediately even if you have the repaying capabilities.
Home Loan with Lower Interest Rates
A high credit score can also help you in getting a home loan at a lower interest rate.
For the quick Disbursal of home Loan
A high credit score for a home loan can assist you in obtaining a home loan quicker, so you don’t have to wait an eternity for home loans which you need immediately.
The perfect CIBIL score for Home Loan
A favorable CIBIL score for home loans would be around 700. Having a CIBIL score for home loans more than 700 is usually considered ideal. The more the CIBIL score goes up towards 900, the more you will be trusted by credit institutions about you paying back that loan. So if all your legal documents are in perfect order, then it is possible to procure home loans very easily and very low-interest rates if you have a CIBIL score above 700.
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