When you apply for a Home Loan or any other credit facility with a bank or financial institution, one of the first things that they look for is your creditworthiness. How do they determine that, you wonder? The answer lies in your CIBIL score. Lenders take a look at this number to determine how creditworthy you are, as a borrower.
If you’re wondering what the CIBIL score is and how it impacts your ability to avail loans, you’ve come to the right place. Let’s first start off with trying to understand what this score actually is.
The CIBIL score is a kind of credit score, which is essentially a three digit number that ranges between 300 and 900. Here, 300 represents the lowest point and 900 represents the highest. This score is issued by TransUnion CIBIL, and it is determined by the credit information bureau using several factors such as these:
The number of credit facilities availed by you
Your credit history
Your repayment history
Your total credit utilisation
And based on their analysis of these factors, a Credit Information Report (CIR) is prepared that clearly outlines your credit score. That’s not all. The CIR also gives you an overview of your loan repayment history and Credit Card utilisation.
Now, when you apply for a Home Loan, the bank or the financial institution essentially pulls your Credit Information Report from the credit information bureau to assess your creditworthiness. If your credit score is high, you’re deemed to be a prime borrower and therefore, you are likely to get your loan application approved more quickly.
On the other hand, if your credit score is low, you’re deemed to be a subprime borrower and your loan application might either be put on hold, or may be rejected outright. This is simply because of the fact that prime borrowers, or the ones with high credit score, are generally considered to be prompt with the repayment of their loan EMIs.
Also, since they tend to have a good credit history and a reliable prior track record of timely repayments, lenders typically categorise prime borrowers under the low risk category. And due to the low risk of default, lenders are more likely to grant loans to borrowers with high CIBIL score.
Since all of this information can be gathered from just looking at a Credit Information Report (CIR) of a borrower, the time taken to process a Home Loan has also significantly reduced, to a point where it only takes a couple of days for the lender to arrive at their credit decision. So, to put it simply, a good CIBIL score can help process your Home Loan application faster.
On the other hand, if you have a below-average credit score, the lender might take some time to approve your loan application, since you’re considered to be a high risk individual. In some cases, the lender might even charge a higher rate of interest. All of this might inevitably end up delaying your Home Loan process by quite a bit.
Yes, you can check your CIBIL score online. Many websites offer this facility. Once you’ve found one, you will be asked to enter your PAN (Permanent Account Number) and a few of your other personal details. Upon entering the requisite details and submitting a request, you will be able to view your CIBIL score for free along with a detailed CIR. You can even check your CIBIL score on Finserv MARKETS. Simply head to the website and enter the required details to get your credit report for free. Inside the report, you’ll find useful information about the breakdown of your credit score, understand how it affects your borrowing power and discover ideas about the actions you can take to improve your score in the future.
Before we wrap up, here’s something that you should know. Checking your credit score very frequently can end up lowering it. This is because credit information bureaus view individuals who frequently request credit checks as overeager borrowers, and therefore, tend to dock some credit points. And now that you know how a good CIBIL score can help process your Home Loan faster, ensure that you always maintain a high score and keep a clean credit history.