Cibil Score Factors and What You Should Do To Maintain It

CIBIL Score

Availing of quick and easy home loans depends on many factors. The lenders look at your eligibility before sanctioning your loan application. Your eligibility for any type of credit again depends on your CIBIL score. A good CIBIL score for a home loan is a major eligibility criterion failing which your home loan application may be rejected. 

You will now ask what is CIBIL score or rather what is a good CIBIL score? Here we shall discuss all about CIBIL score and its impact on home loans.

What is a CIBIL Score?

The CIBIL Score is a 3-digit number ranging between 300-900, denoting one’s credit worthiness. It highlights your financial picture and helps the lenders assess your ability for loan repayment.

If your CIBIL score is between 300-599, then you may not pass the eligibility criteria for a loan. CIBIL scores between 600-749, although not very high, give an individual a good chance of getting a loan approved. 750 and above CIBIL score gives you the best chance to get a loan application approved by a lender. Also, a person with a good CIBIL score can negotiate for a lower interest rate due to their good credit standing.

How to Know Your CIBIL Score

Follow the given steps to check your credit score online:

  • Step 1: Go to the website of any approved credit information company to get a free CIBIL score.
  • Step 2: Enter your details, such as full name, date of birth, PAN number, phone number, etc., and verify using OTP sent to mobile number for authentication.
  • Step 3: Click on the ‘Get Your Credit Score’ button and get your CIBIL score instantly.

Benefits of Having a High CIBIL score

We all know now that a high CIBIL score increases your eligibility criteria for a home loan but the following are some other benefits of having a high CIBIL score:

  • Quick loan and credit card approvals from lenders
  • Cheaper interest rates on loans
  • Better deals on credit cards
  • Get a higher credit limit on your credit cards
  • Availability of processing fees and other charges for loan applications at discounted rates.

Key Factors That Affect Your CIBIL Score

Payment Behaviour

Your CIBIL score is influenced by your past payment history. Paying your credit card bills and loan EMIs timely is important. As per experts, even a 30-day delay can reduce your score by 100 points. For multiple credit cards and loans, it is best to have reminders and alerts to avoid missing or delaying payments. Any delay or missed payment can reflect poorly on your credit score.

High Credit Utilisation Ratio

It is important to watch your credit utilisation ratio. It is the amount of credit used in relation to the credit limit available to you. Experts say ideally one should not exceed using 30% of the credit limit available. If your credit card limit is INR 1 lakh, it is best if you spend around INR 30,000. Using over 50% of your credit limit can hurt your score. A high credit utilization ratio will send a red flag to lenders as it may signal a risk of default.

Outstanding Debt

Make sure to clear off all your outstanding debts. Unpaid dues reflected on your credit report will affect your CIBIL score negatively. It is best to pay off the outstanding debts and dues even if the amount is small. This gives lenders confidence in your ability to pay back.

Paying Only the Minimum Amount Due

Paying only the minimum amount due of the total debt may make you fall into a debt trap. Rolling over the debt can lead to the interest compounding on your outstanding loan balance and reflects poorly on your payment behaviour.

Making Multiple Credit Applications

While applying for a loan or a credit card, lenders check your creditworthiness by considering your credit report. Such inquiries are called hard inquiries. If you send out multiple applications, it will mean multiple credit inquiries, which in turn, will affect your score negatively as it will make you look credit hungry. If your loan application is rejected, wait for some time, get your CIBIL score in place, and then re-apply.

Errors in CIBIL Report

The CIBIL report presents a detailed record of your current and past credit accounts. Having errors in your report can hamper your score. Any discrepancies in your report must be rectified immediately. Thus, checking your credit report from time to time may help.

A Credit Mix

Keep a balance between secured and unsecured loans. Home loans and auto loans are some secured loans while a credit card is an example of an unsecured loan. Having a high number of only one type of credit can affect your CIBIL score. A healthy mix of different types of loans gives lenders the confidence that you can handle all types of loans.

Old Credit Card Accounts

Credit cards help to build credit history. If you close your old accounts, you end up losing the long credit history associated with them. Close new cards and keep the card you have been using for a substantial number of years to keep your credit history intact.

Tips to Maintain a Good CIBIL Score

To have a good CIBIL score, follow these tips:

  1. Make timely EMI and Credit card payments. Do not default.
  2. The utilization of your credit should be below 30%
  3. Clear all outstanding debts as soon as you can
  4. Make sure unsecured and secured loans are well balanced
  5. Avoid multiple credit queries
  6. Review your CIBIL record regularly and rectify errors
  7. Maintain old cards to keep old credit history
Summing Up

You should periodically check your CIBIL score. To get a quick and easy home loan in India and other credit products, you need a score above 750. In other words, keep a note a note of the above factors for a good CIBIL score and enjoy low-interest home loans and other facilities.

Hunny Jaswal
Author: Hunny Jaswal

I love Web Surfing. Writer. Blogger. Self-Believer.| I love to grab the latest news Knowledge and share the fresh dose of technology, lifestyle, travel, how-to’s, life lessons through the social platform and my blog. At my free time I love to read new things and write the post of my blog and share with my social locality.

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